One is a lump sum with a schedule, the other is a faucet you control. Match them to the right jobs and both are excellent; swap them and both disappoint.
These two get shopped against each other constantly, and they should not be, because they are built for different jobs. A term loan is a lump sum with a schedule. A line of credit is a faucet you open and close. Put each on its right job and both are excellent products; swap them and both disappoint. Here is the sorting logic.
Term loan: full amount up front, fixed monthly payment, set term of one to five years in the alternative market. Interest runs on the whole balance from day one, and the payment never surprises you. Predictability is the product.
Line of credit: an approved limit that sits ready. Draw $12K today, pay interest only on the $12K, repay it, and the room comes back. Costs nothing to hold when undrawn beyond any small admin fee. Flexibility is the product.
Term loan jobs: a buildout, a renovation, buying out a partner, a big one-time inventory position, launching a location. One known number, spent once, paid down on a schedule the return can cover. Run any candidate payment through the payment calculator before you commit.
Line of credit jobs: seasonal swings, payroll bridging while invoices clear, opportunistic buys, the unknown-unknowns. If your cash flow breathes in cycles, the line matches the rhythm; pair it with the habits in managing payments without choking cash flow and slow months stop being scary.
The tell: if you can name the exact amount and what it buys, you are describing a term loan. If the honest answer is “it depends on the month,” you are describing a line.
Term loans usually price lower per dollar for a committed amount; lines charge a touch more for the flexibility but only on what you draw, which often makes them cheaper in practice for intermittent needs. Both sit a shelf above deposit-based products in requirements: think a year or two in business, steady revenue, and credit in the 600s for real pricing. If you are not there yet, the ladder still works: start with what your file supports today and graduate; what you need to qualify maps every rung.
A term loan for the renovation plus a modest line for the operating swings is a completely normal structure, and often the strongest one: the big project gets cheap committed money, the month-to-month gets flexible money, and neither product is forced to do the other one’s job.
Want the fit read off your actual numbers? Apply here, statements upload in the app, and we will tell you which structure your file supports today. Straight answer, usually within a day. Or call or text (848) 420-8444.
Send us your positions and we will run the real math, free. One straight answer about whether consolidation gives your business room to breathe, with no pressure either way.