CAPITAL GROUNDWORK
Business Line of Credit vs. Business Loan
A business loan generally provides a defined amount that is repaid over an agreed term. A business line of credit generally provides access to a credit limit that can be drawn according to the agreement.
| Factor | Term loan | Line of credit |
|---|---|---|
| Funding structure | Defined amount | Credit limit with draws |
| Typical fit | Specific one-time need | Recurring/variable need |
| Reuse | Usually not revolving | May be reusable under terms |
| Repayment | Per loan agreement | Per draw/facility terms |
When a term loan may fit
Consider it when the amount and purpose are defined and a fixed financing structure matches the project.
When a line of credit may fit
Consider it when financing needs recur or vary and access to a revolving facility is useful.
Compare the actual terms
Review rates or costs, fees, repayment frequency, term, draw rules, renewal, collateral, guarantees, and prepayment provisions.
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