A loan transaction is an activity in which the one person, generally called as borrower, receives an amount of money at the beginning from another person, generally called as lender. The concerned amount is called as the principal and is obligated to pay back in equal amounts of money to the lender after a certain time.
The lender usually charges a fees or cost of this service to the borrower called as interest. In modern times, there are financial institutions which act as a provider of loans and they give funds to be utilized for projects. Sometimes they issue bonds that are typical source of funding for short term projects. Loans are provided under the regulations governed by authorities and enforced according the law.