Expenses are to be "Ordinary and Necessary" for the line of business.
So, roller covers for a painting business would be acceptable for a paining business to expense, but perhaps not for a dog walking business.
The loan needn't be entered as a liability of the business on your tax return. You personally took out the loan, the interest would be a business expense. The principal on the loan was your personal asset and continues to be so. There is no separate equity account for a sole-proprietorship, whatever the company has is the same as being yours.
If you took out a personal loan, and expenses were paid for the business, the business would show a loss for that year.
Some day when that turns around and the business makes a profit, you get that revenue back.
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