Plain English business funding guide
Business Loan vs. Line of Credit
A term loan and a line of credit can both provide business capital, but they solve different cash flow problems. The right starting point depends on whether the need is defined once or changes over time.
When a business loan may fit
A term loan can make sense when the business knows how much it needs and what the funds will accomplish. Examples include a renovation, acquisition, large inventory order or planned expansion.
- One defined amount
- A set repayment schedule
- Useful for a planned investment
When a line of credit may fit
A line of credit is designed for recurring or unpredictable needs. The business can draw from an available limit, repay and potentially draw again according to the agreement.
- Flexible draws
- Useful for seasonal or recurring needs
- Cost may apply only to amounts used, plus any applicable fees
How to compare them
Compare total cost, payment frequency, term, fees, collateral, personal guarantee requirements and what happens when the business pays early. Most importantly, match the structure to the timing of the cash need.
Ready to explore a starting point?
Answer a few business questions and see which funding path may be worth reviewing first.
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