Line of Credit vs. Term Loan: Which Fits Your Business?
Two of the most common funding options, side by side — so you can pick the one that actually matches how you'll use the money.
A line of credit and a term loan can both put working capital in your account — but they behave very differently once you have them. Choosing the right one comes down to a single question: is this a one-time need, or an ongoing one?
Term loan: a lump sum for a defined goal
A term loan gives you the full amount up front, repaid on a fixed schedule. You know the payment and the payoff date from day one.
It shines when you have a specific, one-time investment:
- Buying equipment or a vehicle
- Renovating or expanding a location
- A large, planned inventory purchase
Line of credit: flexible funds on standby
A line of credit gives you a limit you can draw from whenever you need it, then reuse as you repay. You only pay for what you actually draw.
It shines for ongoing or unpredictable needs:
- Smoothing seasonal cash flow
- Covering surprise expenses
- Bridging the gap between invoices
The quick rule of thumb
If you can name the exact thing you're buying and when, a term loan is usually cleaner. If you want a cushion for whatever comes up, a line of credit gives you flexibility you'll reuse again and again.
Still unsure? That's exactly what our funding specialists are for — tell us how you'll use the money and we'll point you to the right fit.