A business loan is money that a lender gives to a business with the expectation that it will be repaid over time, usually with interest. Businesses use loans to start, grow, or cover operating costs.

Here's how the process typically works:

1. Apply for the loan

   • You tell the lender how much you need and what you'll use it for.

   • The lender reviews your business, including:

     • Revenue and profits

     • Credit score (business and sometimes personal)

     • Time in business

     • Existing debts

     • Business plan (especially for startups)

2. Get approved

   • If approved, the lender offers terms such as:

     • Loan amount (e.g., $50,000)

     • Interest rate (e.g., 8% per year)

     • Repayment period (e.g., 5 years)

     • Monthly payment amount

     • Whether collateral is required (such as equipment or property)

3. Receive the funds

   • Once you accept the terms, the money is deposited into your business account.

   • You can then use it for approved business purposes, such as:

     • Buying equipment

     • Hiring employees

     • Purchasing inventory

     • Marketing

     • Expanding to a new location

4. Repay the loan

   • You make regular payments (usually monthly).

   • Each payment includes:

     • A portion of the amount you borrowed (the principal)

     • Interest charged by the lender

Example