A
bank loan is money lent to an individual or business that is paid off with
interest over an agreed period. Usually this rate of interest is fixed.
This
means that the business knows in advance what the cost
of borrowing will
be and what monthly repayments will be required. This allows the business to
manage their cash flow.
The
bank may require the business to secure its assets against
the loan. This means that if the business is unable to repay the loan, the bank
can demand the sale of the assets to raise money to pay back the loan.