The Money PagesA Loan or a Share?
Lending to a business and owning part of it are different.
In a made-up business project, Bo is offered two different roles.
One is to lend $10. A loan is money someone agrees to repay under certain rules. Bo wouldn't become an owner just by making that loan.
The other is to buy a share, a piece of ownership in the business. That doesn't promise Bo the same repayment as a loan.
Owners might get a payment if the business chooses to share money. Or they might get nothing and lose what they put in.
Loans have risks, too: borrowers may fail to repay. “Loan” and “share” describe different agreements, not a safe choice and an unsafe one.
Money words
Loan
Money lent with an agreement that it will be repaid under certain rules.
A loan is an agreement to repay money. A share is ownership. Both can involve risk.
