Loan

What is a loan?

A loan is money you borrow from a bank, credit union, or other lender that you agree to pay back over time with interest. For small businesses, loans can fund equipment purchases, cover slow periods, finance expansion, or provide working capital. The loan amount is a liability on your balance sheet until it's repaid.

Common business loan types

Small businesses typically access several types of loans:

• Term loans — Lump sum repaid over a fixed period with regular payments
• Lines of credit — Flexible borrowing up to a limit, pay interest only on what you use
• Equipment financing — Loans specifically for purchasing equipment, often secured by the equipment itself
• SBA loans — Government-backed loans with favorable terms for qualifying businesses
• Vehicle loans — Financing for work trucks and vans

Loan considerations

Before borrowing, understand the total cost including interest, whether the rate is fixed or variable, collateral requirements, and how payments will affect your cash flow. Interest paid on business loans is typically tax-deductible.