Basically speaking, a business loan is a bank credit granted for the functions of a business to be paid with interest on or before fixed date.

Business loan is a financial grant awarded to a business for improvement, additional capital, additional resources or other purposes. The business or enterprise applies for a financial grant in exchange for a guarantee that the loan will be used according to the purpose stated in the application and that the loan will be returned in the stipulated time. Failure to do so would mean the confiscation of the item or property named as security or collateral, revocation of the privilege for loans and even acquisition of bad credit name for the business enterprise.

Theoretically, a small business loan is an amount of money borrowed by a small business person to start or run a small business. Realistically, a small business loan is euphemism used by lending institutions to describe personal loans given to small business people.

Consider that you may have an excellent credit rating and a solid business plan and still not be able to get a small business loan because you have no collateral. Even established business people can find themselves in this position, if they do not own enough tangible assets, such as houses or other real estate properties.

In other words, the small business loan is not being granted on the status of your business; it's being granted on your personal financial status. That's why it's important that your personal financial house is in order before you apply for a small business loan.

You will also find that many lenders just don't provide seed money. While they're perfectly willing to give a small business loan to help a business grow, they usually don't want to take the risk of lending to a start up who has no business success track record.