A business loan is a fixed amount borrowed and repaid over an agreed term.
The forms a small business meets
Term loan — a lump sum repaid on a schedule. Used for a defined purchase.
Government-backed loan — a loan from an ordinary lender carrying a government guarantee, which lets the lender accept a borrower they would otherwise decline. Longer terms and lower rates, in exchange for more paperwork and a slower decision.
Equipment finance — secured on the thing being bought — see equipment financing.
Line of credit — not a loan in this sense: drawn and repaid repeatedly, for timing rather than for a purchase.
Collateral
Security the lender can take if the loan is not repaid: equipment, property, receivables, or a general claim over the business's assets.
Secured borrowing is cheaper because the lender's risk is lower. The trade-off is that the asset is encumbered, and a general claim can prevent borrowing elsewhere later.
Personal guarantees
Almost universal for small-business lending, and the single most consequential term in the agreement — see personal guarantees.
Covenants
Conditions the borrower agrees to maintain: a minimum debt service coverage ratio, a cap on further borrowing, sometimes minimum cash or reporting obligations.
Breaching one can make the loan immediately repayable even where every payment has been made on time. They are worth reading before signing, and reviewing whenever the business's position changes.
The real cost
Not the headline rate. Fees, the term, and whether interest is charged on the declining balance or the original amount all move it — see amortization.
The comparable figure is total repaid over the life, alongside the monthly payment against cash flow.
Before borrowing
Whether the business can service it in a bad month rather than an average one, and what the money returns — see return on investment.
Selling part of the business instead of borrowing is raising investment, which for most owner-operated service businesses is neither available nor appropriate.
Refinancing
Replacing existing borrowing with new borrowing, usually to lower the rate, extend the term, or consolidate several debts into one payment.
A longer term lowers the monthly payment and generally raises the total interest paid. Fees on the new facility and any early-repayment charge on the old one both belong in the comparison, and the figure to compare is total cost over the life rather than the monthly payment.