A business loan is a type of debt financing where a financial institution lends money to a company for its operations, expansion, or other needs. The business must repay the principal amount, plus interest, over an agreed-upon period. These loans can be used for a wide variety of purposes, including covering day-to-day expenses (working capital), purchasing equipment or property, and funding growth initiatives.
Purpose: Funds can be used for a wide range of business needs, such as buying new equipment, expanding operations, hiring employees, purchasing inventory, or managing cash flow.
Repayment: The loan is typically repaid in installments over a set term, along with interest.
Sources: Businesses can get loans from various lenders, including traditional banks, credit unions, online lenders, and government-backed programs like the Small Business Administration (SBA).
Security: Loans can be secured by collateral, such as property or equipment, which may result in lower interest rates. Unsecured loans are based on the borrower’s creditworthiness and often have higher interest rates.
