A term loan gives you a lump sum with fixed payments. A line of credit gives you flexible access to a pool of capital you draw from and repay as needed. The right choice depends on whether your need is one-time or recurring.
| Financing type | Business Financing |
|---|---|
| Typical amounts | Term loans $25K–$2M; equipment financing $10K–$500K |
| Decision time | As fast as 24 hours |
| Credit | All credit profiles considered; soft credit pull to start |
| Cost to apply | Zero cost to apply |
| Who we are | A business financing broker. We compare offers from our lender network; we are not a direct lender. |
A term loan is one lump sum; a line of credit is a limit you draw from.
| Comparison point | Term loan | Line of credit |
|---|---|---|
| How you get the money | A fixed amount upfront | A limit you draw from as needed |
| How you repay | Regular installments (weekly or monthly), typically 12–60 months | Repay and draw again; interest only on the outstanding balance |
| Cost | Predictable total cost, fixed rates and payments | Pay only for what you use, at a slightly higher rate; lines of credit often have annual renewal fees |
| Best for | Large one-time needs, such as equipment or expansion | Recurring or unpredictable expenses, such as payroll gaps and inventory |
In detail
A term loan gives you a fixed amount upfront. You repay it in regular installments (weekly or monthly) over a set period, typically 12–60 months. Rates and payments are fixed, so budgeting is predictable. Best for: equipment purchases, expansion, hiring, or any specific one-time investment.
In detail
A line of credit works like a business credit card — you are approved for a maximum limit and can draw any amount up to that limit, repay it, and draw again. You only pay interest on the outstanding balance. Best for: payroll gaps, uneven receivables, seasonal inventory, or any recurring operating need.
In detail
Term loans typically have lower effective rates because the lender assumes a fixed risk. Lines of credit often carry slightly higher rates but lower total cost if you only use a portion of the limit. Compare total cost of capital (factor rate × drawdown amount) rather than the stated rate alone.
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Business line of credit
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Choose by the shape of the need. A term loan gives a lump sum for a defined, one-time purpose and is repaid on a fixed schedule. A line of credit gives a limit you draw from and repay as needed, which fits recurring or unpredictable costs such as payroll timing.
Yes. Many businesses maintain a term loan for growth capital and a line of credit for working capital. Lenders look at total debt-service coverage, so having one existing product does not automatically disqualify you for another.
Working capital and line of credit products typically move faster — often same-day to 48 hours. Term loans take 24–72 hours for decisions and 2–5 days to fund after approval.
Yes, generally. Seasonal businesses benefit from drawing capital during slow periods and repaying when revenue returns, without paying interest on unused capacity. A term loan would require fixed payments year-round regardless of revenue.
Written by lendfloCapital Editorial Team · Last updated
lendfloCapital is a business financing broker, not a lender. This page is general information, not financial, legal or tax advice. Rates, amounts and terms depend on the lender and your business.
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