In most cases, the idea of a "government loan" is a myth. Typically what the government is doing, especially the Small Business Administration, is providing a guarantee to a loan provided by a commercial lender, i.e., your local banker. The loan process is similar, although it may involve somewhat more paperwork and take slightly longer to process. If you are unable to pay the loan back, the government will repay the commercial lender the amount you owe. You, however, are not free of the loan: you simply now owe the government and not the bank.
For more information, go to: SBA Finance Start-up
