Business Term Loan vs Line of Credit
These two products overlap in amount and eligibility — but they are structurally different. The right choice depends almost entirely on what you're using the money for.
Fundember Editorial · Reviewed August 2026 · Methodology
Choose a term loan for…
- One-time large purchases (equipment, renovation)
- Business acquisition
- Debt consolidation
- Predictable fixed repayment
Choose a line of credit for…
- Recurring inventory purchases
- Seasonal cash flow management
- Ongoing working capital
- Flexibility to draw only what you need
Structural comparison
| Factor | Term Loan | Line of Credit |
|---|---|---|
| Fund structure | Lump sum upfront | Draw as needed up to limit |
| Interest | On full balance from day 1 | Only on amounts drawn |
| Repayment | Fixed schedule | Revolving — repay and redraw |
| Best for | One-time, defined purchases | Ongoing, recurring needs |
| Typical rates | 6%–30%+ (APR varies widely) | Often slightly higher than term loans |
| Availability | After full repayment | Ongoing as you repay draws |
Which structure fits this need?
Funding Fit maps your purpose to term versus revolving products.
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