You have too many concepts rolled together that have to be individually understood.

"The equipment was sold."

The equipment was sold by which entity: the person or the S corp? Was it distributed and then sold? Or, did the person assume personal debt?

"the amount received from the sale was applied to the loan."

Was that done while both the equipment and the loan still were the responsibility of the S Corp? Or, both were assumed by the person/shareholder at that point? Or, was there some sort of split, in that leveraged assets were allowed to be sold, approved by the lender holding the debt, as long as the individual assumed the debt and intended to service the loan and had enough resources that the lender was fine with this split?

"the balance of the loan is still being paid by the shareholder." Yes, we understand that part. You never stated the person is now running a business with any parts of this left from that other disposition.

"the biggest part of the loan was form settling the lease on the property.  (not related to shareholder)"

Are you describing a tenant or occupancy lease was terminated by payoff, and the payoff was a loan? In whose name? Is it secured by anything?

"can the interest being paid on the loan be deducted as business interest."

What business? So far, there is no business. In fact, the old business is gone. That's why perhaps this should have been addressed in 2017. At least, parts of this should have been, and there is no indication how it got addressed in the 2017 shut down of the S corp, or its business. Those can be two different things, of course. The S corp could be terminated, and the business operations could have been assumed by this one shareholder as a personal business. We don't seem to be getting any details.