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GCSE Business · key term
A sum borrowed from a bank and repaid with interest over an agreed period.
Used by Edexcel and OCR
Specification 1.3.4 · Paper 1
Revise: Sources of Business FinanceA bank loan provides a sum of money that the business repays, with interest, over an agreed period. It can suit buying equipment or funding expansion because repayments can be spread over the years in which the investment supports the business.
Paper 2
An agreed sum borrowed from a bank and repaid, with interest, over a set period.
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Unlike a bank loan, this investment does not require interest payments or scheduled loan repayments. It also avoids bringing in another owner. However, the amount available is limited by the owner’s savings, and the owner risks losing the money invested if the business fails.