A loan may be unsecured or it may be secured using assets as collateral. It can also be secured by collateral along with a guarantee by another party. See our section on SBA loans. One of the biggest factors involved in a lender's decision to grant a loan is the risk to the lender. Generally, the greater the risk, the higher the interest rate.
Risk factor can often determine the terms of the loan as well.
You may also be asked to provide your personal credit information. It's a good idea to get a copy of your credit report from all three major credit reporting agencies before applying for a loan so you can make sure the information is accurate and consistent. If the borrower possesses readily salable commodities or collateral, this can add to the means of repayment and tends to increase the amount of credit that may be extended. Some businesses pay off their loans, particularly their long-term debt, and others obtain new loans. In some cases the loan can be repaid before maturity at the option of the borrowers.