In the world of business one can either make profit or loss. When profit is made the business grows, but when loss occur the business suffers and eventually fails. Life is all about give and take and that also refers to business, you invest in other to yield more income. Keeping the funds saved without investing will not yield income. There are different ways one can invest and make investments, but our main focus here are the financing organizations. These organizations give loans to businesses and also to those who plan on starting a business. The entrepreneur who goes to an organization for a loan has one aim, and that is making profits from its sales or transactions. In the same sense these organizations also make good income by giving loans. But how? Here is how: Loan companies make profits by levying an interest rate on the principal sum of money that they are lending. The amount you take, the more interest you have to pay. Most organizations also lend money to each other on a huge scale. Most of this lending is on a short-term basis, usually no longer than three months and if there be a chance that one uses his property as collateral. failure to pay back will lead u losing your property to the organization or company. One more thing is that when organizations borrow money from another organization they lend out the money attaching a higher interest for loaning that money. With all of this and more, an organization or business profits when loans are given out Risks involved in lending Giving out loans to entrepreneurs that are not trust worthy: before giving out loans to anyone the organization should make sure that the person is not a fraud. Several investigation should be carried out by the organization on whoever wants a loan, a collateral should be pre nisented before giving a loan. Bad business plan: someone who takes a loan with the plan of starting up a business should give details on the kind of business he intends to start and also his business plans. If it's a good one, the loan can then be given. An entrepreneur with a bad business plan will end up taking a loan and then fail in returning the principal amount and the interest rate due to poor plans and management of business. This will cause a big loss to the organization. A good business plan should be made when starting a business and organizations should tread with caution when giving out loans and good management from both sides should be the top priority.