Mar 09, 2017

Term Loan vs. Line of Credit: What’s the Best Fit for Your Small Business?

There are countless reasons for a small business to pursue financing and a bevy of options to meet these needs. Lendio provides a central location for business owners to receive offers from many lenders, as well as consultants to help guide business owners through their financing journey. When working to find the right financing fit, it is important for small business owners to grasp how they are going to use the proceeds of the loan.

Term loans and lines of credit, the two most popular options for small businesses, serve different business uses and fit different financing needs with their distinct structures.

Term loans allow small businesses to pay back their loan proceeds over a longer period of time and typically have a biweekly or monthly payment schedule. A longer payback structure with less frequent payments is friendly for investments in business growth that take time to provide returns for the borrower. If your business needs financing for one of the following reasons, a term loan would be a great fit:

Lines of credit allow business owners to access capital quickly during a time of need. They are typically paid back over a shorter period of time and allow businesses to have an available source of capital to draw upon. The following situations demonstrate when a business line of credit could be a great fit for a business:

Term loans and lines of credit are two of the most popular and valuable financing products that a small business can pursue. Understanding the product structure and how the proceeds will be used is important in deciding which financing option is best for you and your business.

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