The term loan refers to a credit vehicle in which one party lends money to another. The recipient of the loan is then responsible for paying back the amount borrowed, plus interest and finance charges. Loans can be either one-time or an open-ended line of credit. Different types of loans include secured loans and unsecured loans, commercial loans, and personal ones. Learn more about each type and how to choose a loan that is right for you.
Before money or property changes hands, the parties must agree on the terms and conditions of the loan. In some cases, the loan terms and conditions may need to change as the company’s circumstances change. For example, loans are more flexible than bonds in that they can be repaid earlier if the circumstances change. Furthermore, they may have more flexible repayment terms, while bonds are more rigid when it comes to refinancing conditions.
Bank loans are a common way to obtain funding for a new or expanding business. Most banks prefer lending to existing businesses with a proven track record because they can use their assets as collateral. This type of lending is known as asset finance. Banks will base the loan amount on a borrower’s ability to repay it and the security put up as collateral. However, bank loans may require a lot of documentation, so be prepared to submit supporting documents.