Record an EIDL or SBA Loan in QuickBooks: Proceeds and Payments

An EIDL or SBA loan is a liability, not income. Record the funds as a deposit into a long-term liability account (something like 'EIDL Loan' or 'SBA Loan Payable') so the money never touches a revenue account. Then split every monthly payment into two pieces: the principal, which reduces that liability, and the interest, which posts to an interest expense account. Only the interest is deductible.

If the EIDL deposit and the monthly withdrawals already sit on your bank statement, converting that statement to a QuickBooks file gets each transaction into the register cleanly, ready to categorize to the right account. Our tool turns a PDF bank statement into a .qbo file you can import, which saves retyping the loan deposit and every payment by hand.

Last updated July 2026. General information, not tax advice. Confirm your loan terms against your SBA statement.

Why an EIDL is a liability, not income

This is the mistake that throws off the whole set of books. When a five or six figure deposit lands from the SBA, it is tempting to let QuickBooks guess and file it under sales or other income. Do not. The Economic Injury Disaster Loan is borrowed money you have to pay back, so it belongs on the liability side of the ledger. Booking it as income would inflate your revenue, overstate your profit, and hand you a tax bill on money that was never yours to keep.

Recorded correctly, the loan sits as a debt you owe, and the balance flows onto your balance sheet and financial statements as a long-term liability that shrinks a little with each payment. That is exactly what a lender, a bookkeeper, or a future buyer expects to see.

Step 1: Set up the long-term liability account

In QuickBooks Online, open the Chart of Accounts (Settings, then Chart of accounts), click New, and choose the account type Long-term liabilities with a detail type of Notes Payable. Name it clearly, for example 'EIDL Loan' or 'SBA Loan Payable', and leave the opening balance at zero. You will create the balance from the actual deposit in the next step, not by typing a starting figure, which keeps the register and the bank feed in agreement.

COVID EIDL loans carried a 30 year term with a fixed interest rate of 3.75% for businesses and 2.75% for nonprofits, so most borrowers will be tracking this liability for a long time. A clean account name now pays off every month for years.

Step 2: Record the loan proceeds (the deposit)

When the SBA funds hit your checking account, record the deposit against the liability account you just made. You can categorize it straight from the bank feed: find the incoming deposit, and set the category to your 'EIDL Loan' liability account instead of any income account. If you enter it manually, use New, then Bank deposit, pick the account that received the money, and on the deposit line choose the EIDL liability account. That single entry increases both your cash and your loan balance by the same amount, which is exactly right.

If the SBA netted a one-time $100 UCC lien filing fee out of your proceeds (this applied to loans over $25,000, which require collateral), your deposit may be $100 short of the approved amount. Record the deposit for what actually arrived, then book the $100 as a bank charge or filing fee expense so your books match the bank to the penny.

Step 3: Record each monthly payment (principal and interest split)

Here is the part people get wrong. A loan payment is not a single expense. Each payment is really two transactions bundled together: part pays down the principal you borrowed, and part covers the interest the SBA charges. Pull the split from your SBA loan statement or amortization schedule, because the ratio shifts over the life of the loan (early payments are mostly interest, later ones mostly principal).

In QuickBooks Online, record the payment as an Expense or a Check with two category lines. Line one: your 'EIDL Loan' liability account for the principal portion, which lowers the balance you owe. Line two: an Interest Expense account (create one under Expenses if you do not have it) for the interest portion. The two lines add up to the total that left your bank. Only line two is a deductible business expense; the principal is repayment of borrowed money, not a cost of doing business. We walk through this split in more detail in our guide to recording a loan payment in QuickBooks.

How each transaction hits the books

The EIDL advance or grant is different

Do not confuse the loan with the advance. Early in the COVID EIDL program, many applicants also received an EIDL Advance of up to $10,000 (and some received Targeted or Supplemental Targeted Advances). Those advances were grants that do not have to be repaid, and Congress specifically excluded them from taxable income. So they are not a liability at all.

Record a forgiven advance as Other Income, ideally in a dedicated account named something like 'EIDL Grant (tax-exempt)' so your accountant can flag it correctly at tax time. Keep it entirely separate from the loan liability account. If you are unsure whether a given deposit was the loan or the advance, your SBA paperwork will spell it out; the two hit very different accounts and very different tax treatment.

QuickBooks Desktop: same idea, different screens

The concept does not change in QuickBooks Desktop. Create a Long Term Liability account for the loan through Lists, then Chart of Accounts. Record the incoming funds with Banking, then Make Deposits, posting the deposit line to that liability account. For each payment, use Banking, then Write Checks, and enter two lines on the Expenses tab: the principal to the liability account and the interest to Interest Expense. Desktop's built-in Loan Manager can also track the amortization and post the split for you if you prefer to automate it.

Let your bank statement do the data entry

Whether the loan arrived last year or last week, the fastest way to get every one of these transactions into QuickBooks is to import them rather than type them. The EIDL deposit and each monthly SBA withdrawal already appear on your bank statement, so a converted statement drops them straight into the register, where you categorize the deposit to the liability and each payment to the two-line split. See our walkthrough on how to import a bank statement into QuickBooks Online for the full flow.

This matters most when you are cleaning up months of history at once, for example a business catching up on books that logged the loan as income all year. Accountants handling several clients at a time can move faster with a repeatable conversion step; our bank statement to QuickBooks workflow for accountants covers that. And because a big loan deposit can look like a windfall, it is worth reviewing alongside any owner's draws and distributions so you do not accidentally treat borrowed money as profit available to take out.

Frequently asked questions

How do I record an EIDL loan in QuickBooks?

Create a long-term liability account named for the loan, then record the SBA deposit against that account rather than any income account. Each monthly payment splits into two lines: principal to the liability account and interest to an interest expense account, using your SBA statement for the amounts.

Is an EIDL loan income or a liability?

An EIDL loan is a liability, not income. It is borrowed money you must repay, so the proceeds post to a long-term liability account and never to sales or revenue. Booking it as income would overstate your profit and could trigger tax on funds you actually owe back to the SBA.

How do I record EIDL loan payments in QuickBooks?

Enter each payment as a check or expense with two category lines. Post the principal portion to your EIDL liability account, which lowers the balance owed, and post the interest portion to an interest expense account. Get the exact split from your SBA amortization schedule, since the ratio changes over time.

Is an EIDL loan taxable?

The loan proceeds themselves are not taxable income, because a loan is money you repay. Only the interest you pay is deductible; the principal is not an expense. The separate EIDL advance or grant was forgiven and excluded from taxable income, so record that as tax-exempt other income, not as a loan.

How do I split principal and interest on a loan payment?

Use your loan statement or amortization schedule, which lists how much of each payment is principal and how much is interest. In QuickBooks, enter the payment with two lines: principal to the loan liability account and interest to interest expense. The two lines together equal the total payment that cleared your bank.