I'm not understanding why this would not be a business expense.
Because the money was not earned by the business, and no business assets were used as collateral to secure the loan. The loan is secured with a personal asset - your primary residence. The fact you used the money to pay off a business asset doesn't matter. You could have used it for practically anything, and it's still not a business expense. As I said earlier, there are exceptions. But none of them apply in your specific situation. Not a single one.
I don't make the rules - congress does, the treasury department enacts them and the IRS enforces them.
