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When paying back a SBA loan, do you pay it off with pre or post-tax money?

The income tax rate for a business in NY state is over 40% so this would make a big difference in the monthly cash flows for the owner.

Can't remember from my Accounting classes how it works for an LLC paying off debt, I think it's taxed first as income then you can use it to pay off debt.

Thank you,

Albany, NY

Tom John

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To make it simple, you have to make a profit (and pay taxes on it) to have cash flow to service the debt principle. The profit is taxed and then used to pay the principle (post-tax). Interest is an expense and is deductable as such (pre-tax).

Mar 29, 2012