Business Loan — Types, conditions and recording
A loan is a financial product where a bank lends funds to a business with the obligation to repay in installments with interest. It represents a long-term or short-term liability on the balance sheet.
Definition
A loan is a financial product where a bank lends funds to a business with the obligation to repay in installments with interest. It represents a long-term or short-term liability on the balance sheet.
Details
Types: investment (for equipment, property — 5-15 years), working capital (for liquidity — 1-3 years), overdraft (credit line on business account). Interest is tax-deductible. Principal is NOT an expense — only interest. When drawn, funds are recorded as asset + liability.
Example
DOOEL takes a 500K MKD working capital loan for 2 years at 6%. Monthly installment ≈ 22,200 MKD (principal + interest). Interest (~2,500 MKD/month initially) is tax-deductible.