Traditional loans from banks or other lenders to businesses, often referred to simply as a commercial loan, are a financing strategy as old as time. There are many different styles of commercial loans, however they nearly all follow the same basic principle; a lender will offer some capital to a borrower in exchange for a promise to repay the amount back, with interest, over a certain period of time.

Commercial loans are a great way to infuse capital into a company without giving up equity ownership in your company, unlike equity financing in which a portion of the company's ownership is sold.

Costs and terms vary wildly across lenders and types of loans, however nearly all commercial loans require collateral on an asset or a personal guarantee as backup for collection if the business defaults on the loan.

Many commercial loans work best for companies with known, traditional business models—for example, a restaurant, a salon, a furniture store, etc. That being said, the variety of types of loans varies heavily, so this isn't a hard limitation by any means.

Business loans are typically only available to already established companies. At a minimum, you can sometimes find merchant cash advances if you have 6 months of revenue. For traditional banks, you typically need at 2 years of revenue history.

You can usually repay your loan as quickly as you want to help reduce interest. Once your loan has been repaid, you're in the clear. You never give up ownership of your company, so the only thing you've lost is the extra money paid to interest along the way. After successfully paying off the loan, your business will often be eligible for an even larger credit extension depending on the type and the trajectory of your business as a whole.

This is the scary part—most business loans come with a personal guarantee. It’s a backup way to pay a loan, if the original borrower defaults. For the lender, a personal guarantee is a way to reduce the risk of a loan, in case a business fails. Personal guarantees are standard on most commercial loans, especially for early stage businesses, and they help provide additional security on the loan so that the lender can feel confident providing funds to more businesses.

Most personal loans are unsecured, which means that any assets owned by the guarantor are able to be claimed by the lender (homes, cars, 401ks, usually not your first-born child, etc.). They can do so immediately upon the default of the primary borrower (aka if the business were unable to make payment).

This means if your business fails, you might not just lose your business—you could lose everything, and end up even declaring bankruptcy in the process.

Here is a short list of some common types of business loans:

Call your bank, or visit their website, that's often a good place to start. NerdWallet is a great resource to learn more about how commercial loans work, and which lenders are offering good terms. The best advice for startups is to be sure and shop around, get the best terms you can, and be sure the structure is a good fit for your business.