The principal is the amount borrowed. Interest and any applicable fees contribute to the cost of using those funds, while the agreement sets out repayment timing and other obligations.

Business loans can support equipment, stock, premises or expansion. The useful life and income profile of the purpose help explain what repayment period may be suitable.

Read the agreement as a whole, including security, guarantees and late-payment consequences. A business loan should support a workable commercial plan rather than depend on uncertain future growth alone.

Key takeaways

  • The principal is the amount borrowed.
  • Business loans can support equipment, stock, premises or expansion.
  • Read the agreement as a whole, including security, guarantees and late-payment consequences.