In commercial law a loan is a transfer of money or a liquid security (such as shares in a publicly traded corporation) where the transferor expects the return of the entire amount of loaned money or property at a later date. There are many ways to provide security for a loan (a mortgage, a pawn or a pledge of collateral) and many ways to prove the existence of a loan (by mere written agreement, a promissory note, debenture or an IOU).
An advance of funds alone does not establish a loan. In many cases, there is an argument about whether a loan exists. In some cases, an argument is made where the money was a gift instead of a loan (for example, by a child who is given money for their education), or a loan instead of a gift (after a marital breakdown, where the party advancing the money insisted it was a loan, but the other party insists it was a gift). There can also be arguments about whether the money advanced was in fact an investment and not a loan. Some of the factors considered in such disputes are:
- Whether the transferor is in the business of lending money (such as a bank)
- Whether any re-payments were made or expected
- The purpose for which the money was advanced (say, to use as a down payment for a home)
- Whether there was ever a demand for repayment