What is loan disbursement?

Loan disbursement refers to the actual release and transfer of approved loan funds from the lender to the borrower's designated account. This represents the final step in the loan approval process, occurring after all documentation, verification as well as compliance requirements are satisfied.

The disbursement process begins after loan approval and acceptance of terms. For business loans, funds may be disbursed directly to the borrower's business account or to specific vendors depending on the loan purpose. Equipment financing may involve direct payments to suppliers, whilst working capital loans are typically disbursed to the business account.

Key disbursement steps include:

• Final documentation review and signing
• Collateral verification for secured loans
• Insurance requirement fulfilment
• Account setup and verification
• Fund transfer initiation

Disbursement timing varies by lender and loan type. Digital lenders may disburse funds within 24-48 hours, whilst traditional financial institutions might require 3-7 business days. Complex loans involving property or equipment verification may take longer.

Partial disbursement is common for construction loans or staged financing arrangements. The borrower receives funds in instalments based on project milestones or usage requirements. Full disbursement occurs when the entire approved amount is released simultaneously.

Post-disbursement, interest calculation begins, and repayment schedules activate. Borrowers should verify receipt of correct amounts and understand when repayment obligations commence. Proper disbursement documentation serves as proof of fund transfer and loan activation for accounting and tax purposes.