Business Loan is a sum of money borrowed by a company from a bank or lender to finance its operations, expansion, or other business needs, with an agreement to repay the loan amount plus interest over a specified period.
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Last Updated: December 12, 2025
A business loan, by definition, is money or a line of credit a business or individual gives to another business for its startup or operations. A business needs to pay back the loan, usually in installments.
The business loan definition includes commercial real estate loans, as well as commercial and industrial loans.
A commercial real estate loan is a line of credit that a business owner can use to buy, develop, or build real estate for their business. In many cases, this is a mortgage that uses the business property as collateral.
A commercial and industrial loan is a loan that can fund a number of business activities and needs, including:
A business owner might need to provide collateral to secure this type of loan as well, but that collateral can’t be real estate.
The biggest benefits of a business loan come from the opportunities that a loan can create. Business loans make it possible for anyone to start a business. An entrepreneur doesn’t have to be rich or well-connected to start a business if they have a good idea and a willing lender.
A business loan can also make it easier to start or build up a business quickly. With a loan, entrepreneurs don’t have to wait to raise funds on their own before putting a new idea in motion.
The biggest disadvantage to a business loan is that it has to be paid back with interest. Interest rates can be expensive (especially for newer businesses with minimal credit history), and loan payments will be due regardless of whether the business has a good or bad quarter. Additionally, businesses that put real estate or other property up as collateral to secure a loan could risk losing that property if they run into tight times and default on the loan. Finally, if a company’s business structure doesn’t limit personal liability, the owner could lose personal assets in a business loan default.
A business loan can help business owners fund a new business or improve an existing business. While these loans provide opportunities for many, paying back the loan money can be a large financial burden. Also, if the business has trouble paying back the loan, the owners could lose personal or business property for defaulting on the loan. Wise business owners will read the fine print of any loan agreement and review its terms with legal and financial professionals before signing.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
Written by ZenBusiness Editorial Team
The ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over 850,000 entrepreneurs launch and grow their companies. The team’s writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions.
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