This post was originally published on On Deck
Running a business can often mean needing capital beyond what you have on hand. The right type of financing can help you maintain operations and invest in growth opportunities. Two of the most common business financing options are a business line of credit and a business term loan.
However, there are some major differences between the two. Understanding how each of these types of business credit works can help you decide which is right for your small business.
Business line of credit vs. term loan: what’s the difference? Business Line of Credit Business Term Loan Funding Revolving credit that you can borrow again as you repay. Upfront lump sum of money you pay back in installments over a set term. Loan Amount Typically the credit limit is for a smaller amount. Often offers a larger amount of money. Interest Pay interest on the amount you borrow. Typically comes with a fixed interest rate. Repayment Payment frequency and amounts can vary depending on the lender and how much you draw. Set repayment schedule, often with a weekly, bi-weekly or monthly payment. Qualifications Varies by lender, but most
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