Both put cash in your hands, but they solve different problems. Matching the tool to the need saves real money.
The short version
- ✓A line of credit is flexible, revolving, interest only on what you draw.
- ✓A term loan is a lump sum at a fixed schedule — best for one-time needs.
- ✓Many businesses keep a line on standby and use term loans for big moves.
Reach for a line of credit when…
Your needs are recurring or unpredictable — covering payroll gaps, buying inventory, or smoothing seasonality. You only pay for what you use.
Reach for a term loan when…
You have a single, larger purpose — an expansion, an acquisition, or major equipment — and want predictable payments over a set term.
Often, both
A standby line for day-to-day flexibility plus a term loan for big investments is a common, healthy setup.
QF
Written by the Qualify Finance Team
We help small business owners understand funding options, strengthen their profile, and get matched to the right lender — across every credit profile.