A business term loan provides a specific amount of money upfront that the business repays over a defined period. It can work well for a planned expense such as expansion, equipment, renovation, or another large purchase where you know how much funding you need.
A business line of credit provides access to a borrowing limit that you can generally draw from as needed. You typically pay interest on the amount you actually use rather than the entire available limit, depending on the agreement.
A term loan offers predictable financing and a structured repayment schedule, while a line of credit provides greater flexibility for expenses that fluctuate over time.
The better option depends on the purpose of the borrowing. For a single large expense, a term loan may be easier to manage. For recurring short-term cash needs, a line of credit may be more practical. Our comparison of a business loan vs. line of credit explains the key differences.
