What is the difference between a direct loan and a loan guarantee?
A direct loan is an arrangement in which a lender gives money or property directly to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point(s) in time. Usually there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan (though modern capital markets have developed many ways of managing this risk). A loan guarantee is a loan backed by a government agency which undertakes to repay a loan in case the borrower defaults. Typically, student loans and business startup loans are guaranteed loans.