Guide · Comparison
Business Loan vs Line of Credit
Both put working capital in your hands, but they're built for different problems. Here's a clear comparison of how each works, what it costs, and which scenarios each one wins.
Side-by-side
| Feature | Term loan | Line of credit |
|---|---|---|
| Structure | Lump sum | Revolving limit |
| Interest on | Full balance | Drawn amount only |
| Best for | One-time investments | Ongoing cash-flow gaps |
| Term length | 1–5 years typical | Open-ended, renewable |
| Payment | Fixed schedule | Based on outstanding balance |
Pick by scenario
- Opening a second location: term loan.
- Covering payroll during slow weeks: line of credit.
- Buying inventory for a busy season: line of credit.
- Renovating a restaurant or shop: term loan.
- Bridging a 60-day customer payment: line of credit.
See your options
One BizKred application covers both. We'll match you with lenders offering the structure that fits your use of funds.
Frequently asked questions
What's the main difference?
A term loan is a lump sum repaid on a fixed schedule. A line of credit is a revolving limit you draw against and pay interest only on what you use.
Which is cheaper?
Term loans usually have lower headline rates. Lines of credit can be cheaper overall if you only draw occasionally.
Can I have both?
Yes — many businesses pair a term loan for a one-time investment with a line of credit for ongoing cash-flow management.
Which is easier to qualify for?
Lines of credit often require stronger credit history because they're revolving. Term loans can be more accessible at lower credit tiers with consistent revenue.
How fast can each fund?
Online term loans fund in 1–3 business days. Lines of credit also fund quickly, though approval may take longer due to ongoing underwriting.