Now I can't provide feedback on the question from an employers perspective can I can comment on what I believe you can do in order for this arrangement to be successful from a intern's point on view. None of this information provided exclusively applies to intern's but I feel the effects of getting it wrong are amplified in such situations.
I have worked in two teams during my placement so have been able to analyze which worked well and what didn't in both environments.
I think the first thing to consider here before we even begin to talk about what you can do once you have hired an intern and they have started their work placement, is whether you have the schedule and resources to spend a good amount of time with your intern.
If your company consists of 3-4 people who are all constantly having to work 10 hours a day to just about keep on top of your workload, then maybe this might not be the best option for you. In most cases, if you are hiring an intern from university, it is not uncommon for this job to be their first full-time position in their given field. They may have the academic knowledge for the job but may be unsure or lack the confident to utilize their skills in "the real world". This will therefore require some effort from your end to ensure that they are given direction and support.
If you hire an intern with the hope that they will be able to understand the purpose of the business and jump straight into the projects you're working on, you will either hit the jackpot or be spending a decent amount of your probably already small budget on a resource that you're not taking full advantage of.
Now that you've delegated some of your workload and have decided you will have time to spend with you intern, you need to ensure you have a solid, well structured plan of what your intern will be doing. You may be wanting to hire a software engineer so this role is pretty self-explanatory but take some time to decide exactly what projects they will be working on and when.
You might find that your intern speeds through the work you had planned for them within the first 5 months so you want to make sure you have enough work set out to cover the full employment period. On the other hand, its also to important to make sure you have tasks at varying levels so that if your intern's skills are at a slightly lower level or they require more time to learn a new task, you have the framework to compensate this.
I would expect your intern to be working pro-actively and be requesting for additional work once a previous task has been completed, but you shouldn't rely exclusively on this type of work ethic. Speaking from experience, there are only so many times you will nag your boss for additional work and set yourself tasks before you start browsing stack overflow (or writing and answer questions such as this).
Your intern is there to gain some real world experience, make an impression and hopefully find a place to work once they graduated. Give them the resources they need to do so.
Now although your intern might look like they are coping well and say that they have understood the task, students (lets admit it guys) can sometimes think that because they've spend a couple of years at university, they know it all. This is not the case. They also might not have the confident to ask for more assistance.
Don't just ask "How are you finding it?", take 10 minutes every week to have a feedback session with your intern to discuss what work they have been doing, what they have been finding easy, what areas have been particularly difficult, if they've seen anything they would like to do more work on. This will not only been a good opportunity for you to keep track of their progress, but also allows you to create a better working relationship with your intern.
Taking steps to ensure your intern is confident in approaching you and feels like a member of the team, will positively correlate with work performance and job satisfaction.
Know when to trust your intern and take risks
I understand that taking on a intern, like any new member of staff, can be a big risk. There is the possibility that mistakes can be made that could potentially cost you a lot of time and money. So you need to be evaluating your intern's ability and know when its appropriate or whether you want to move them onto a bigger task (a great time to evaluate this is the feedback sessions).
If you decide you're willing to take the risk, make sure your intern is aware of this but show confidence in them. I can assure you there is nothing worse than having your manager logging you onto a server and quite literally shaking next to you as he shows you a task and continuously repeats "Don't delete anything". If you have your doubts, don't do it.
Remember this is not just a learning experience for your intern, but also for you. If you are only trusting yourself with all the responsibilities in your company, sooner or later your going to be overwhelmed. Providing your intern with tasks of a higher importance can not only allow them to prove themselves and be a bigger contributor to the team, but can also make you confidence in your judgement and decision making.
Now you might be thinking that all of these issues can be resolved if you have a proper management structure in place and some of this information may be very obvious to you. I have no prior experience or knowledge of how to effectively manage a team but these are just my observations. As stated before, this question comes for my own personal experiences as an intern and should stand an example of the importance of thinking about your situation and if this would be the best option for you to ensure a positive experience.