What a term loan is
A term loan gives you a lump sum up front that you repay on a set schedule over a fixed period. Each payment covers principal and interest until the balance is gone.
It tends to fit a one-time, defined investment: a buildout, a large inventory purchase, a specific expansion, or consolidating other debt. You know the amount you need, and you want a predictable payment.
What a line of credit is
A business line of credit is revolving. You are approved up to a limit, then draw what you need, repay it, and draw again during the draw period. You generally pay for what you use rather than the whole limit.
It tends to fit recurring or unpredictable needs: smoothing seasonal cash flow, covering a gap while an invoice is outstanding, or having a cushion ready for an opportunity.
Side by side
The clearest way to see the difference is to line them up:
- Term loan: lump sum, fixed schedule, best for a single defined purpose
- Line of credit: revolving limit, draw as needed, best for ongoing or variable needs
- Term loan: predictable payments over the life of the loan
- Line of credit: flexible balance that rises and falls with your draws
Some owners use both: a term loan for the big one-time project and a line of credit kept open for the ebb and flow of working capital.
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Apply nowHow to choose
Ask whether the need is a single event or a recurring pattern. A single event usually points to a term loan. A recurring or uncertain pattern usually points to a line of credit.
Pricing and terms for both are set by the lender and vary with revenue, time in business, and credit. As a broker we can put real options for each in front of you so the choice is based on your actual numbers, not a guess.