How do i enter a loan in quickbooks

Published December 8, 2025•6 min read•Business Loans

Taking out a loan is an important financial step for your business. Maybe you need funds for new equipment, expanding your office, or managing short-term cash flow. Whatever the reason, accurately recording that loan in QuickBooks keeps your books clean. You need to know exactly what you owe and when those payments are due. Getting this right from the start saves you headaches later during tax time or financial reviews. Let’s walk through exactly how you enter a loan in QuickBooks, step by step.

Understanding Loan Entries in QuickBooks

When you receive loan money, it is not income. It is a liability—money you must pay back. QuickBooks handles liabilities differently than standard income or expenses. You must create a specific account to track the principal amount you borrowed and the interest you pay over time.

Before you even open QuickBooks, gather your documents. You need the original loan agreement. This document tells you the principal amount, the interest rate, the repayment schedule, and the closing date. Having these details ready makes the process smooth.

Choosing the Right Account Type

The first crucial decision involves where to record this debt in your Chart of Accounts. For most business loans, you create a new account under the Other Current Liabilities or Long-Term Liabilities section. If the loan matures in less than one year, use Current Liabilities. If it lasts longer, use Long-Term Liabilities. This categorization is vital for your Balance Sheet. Understanding business loan interest rates is also essential for calculating accurate expenses associated with the debt.

Here is how you add that liability account:

Navigate to the Gear Icon (Settings).
Select Chart of Accounts.
Click New to create a new account.
Choose Other Current Liability or Long-Term Liability as the Account Type.
Give the account a clear name, perhaps "Business Term Loan" or "Equipment Financing Payable."
Save and Close.

Recording the Initial Loan Proceeds

When the lender deposits the money into your business bank account, you need to record two sides of the transaction. This is double-entry accounting in action. You increased your cash, and you increased your debt.

Step-by-Step: Recording the Deposit

You handle this transaction directly in your bank register or through the Banking Center, depending on whether you use QuickBooks Online or Desktop.

If the transaction already downloaded into your bank feed (the "For Review" tab):

Find the deposit transaction showing the full loan amount received.
When categorizing the transaction, do not choose an Income account.
Instead, select the Liability Account you just created (e.g., "Business Term Loan").
Review the entry. The loan funds increase your bank balance (Asset), and the categorization increases your loan payable (Liability).
Click Add or Match.

If you are manually entering the transaction in the check register for that bank account:

Record a deposit for the full loan amount.
In the Account column, select your new loan liability account.
Save the entry.

You have successfully recorded receiving the loan funds. Now, you manage the repayment.

Accounting for Loan Payments

Loan payments involve two components: paying down the principal balance and paying the interest expense. You must separate these amounts for accurate reporting. Interest is an expense; principal repayment reduces the liability.

Tracking Interest Expense

You should set up a separate expense account for loan interest. This typically goes under Other Expenses in your Chart of Accounts. Name it clearly, such as "Loan Interest Expense."

When you make a monthly payment, you split that payment amount between the liability account (to reduce the debt) and the interest expense account (to record the cost of borrowing). To understand the implications of these expenses, first grasp the fundamentals of how small business loans work.

Recording the Monthly Repayment Transaction

Assume your payment is $500, and your amortization schedule shows $450 goes to principal reduction and $50 is interest for that month.

When you record this payment (usually as a check or an expense in QuickBooks):

Record the payment coming out of your main bank account.
The total amount paid ($500) is entered as a credit to your Bank Account.
Record the portion reducing the debt: $450 as a debit to your Loan Payable Liability Account.
Record the cost of borrowing: $50 as a debit to your Loan Interest Expense Account.

This process ensures your bank balance decreases correctly, your interest expense shows up on your Profit & Loss statement, and your loan liability balance drops by the correct principal amount.

Managing Amortization Schedules in QuickBooks

For simple, short-term loans, manual tracking might work fine. However, for complex business loans or mortgages, using an amortization schedule is non-negotiable. QuickBooks does not automatically generate a full amortization schedule for a standard liability account entry.

You need an external amortization table (provided by your lender or easily created in a spreadsheet) to know the exact principal and interest split for every payment. You apply these figures manually each month as described above.

When to Use QuickBooks Loan Manager (Desktop Users)

QuickBooks Desktop users have a built-in tool called the Loan Manager. This feature automates the tracking process, which simplifies how you enter loan details for regular payments.

Using the Loan Manager involves:

Inputting the original loan balance, interest rate, and term.
The manager automatically calculates the required principal and interest split for each payment based on the repayment schedule you set.
When you record the payment, you link it to the corresponding amortization entries generated by the tool.

If you use QuickBooks Online, you likely rely on external amortization tables and manual entry or third-party apps designed to integrate payment tracking.

Reviewing Your Loan Balance

Regularly check your loan liability account. You can run a Balance Sheet report at any time. The ending balance in your "Business Term Loan" account should match the remaining principal balance on your amortization schedule. If these figures do not match, you need to review your previous payment entries. Errors often happen when you forget to split the payment correctly between principal and interest.

Frequently Asked Questions About Entering Business Loans

How do I record the initial fees charged by the bank when I get the loan?

If the bank deducts fees (like origination fees) before sending you the funds, you record these fees as an expense—often categorized as "Loan Fees Expense" or "Amortized Financing Costs"—against the initial loan deposit. This effectively reduces the net cash you received while correctly recording the cost of obtaining the financing.

Should I use the bank account where the loan money sits to track the loan?

No. You use your main operating bank account to record the deposit of the funds. The loan itself resides in a separate Liability Account on your Balance Sheet. The bank account only shows the cash you have available to spend.

What if I make an extra principal-only payment?

Record the full payment amount as usual. Then, in the categorization breakdown, assign the interest portion to the "Loan Interest Expense" account and assign the remaining, larger amount to the "Loan Payable Liability Account." Ensure the total allocated amount equals the total money leaving your bank account.