A business loan and a business line of credit are different forms of business financing. With a business loan, you receive a lump sum of money that you pay back over time. A line of credit is a pool of money that you can access at any time, up to a limit.
Typically, Business Loans It is a better option if you need a lot of money for a major purchase or expansion. Business Lines of Credit It's a good way to fill cash flow gaps or raise funds in emergencies.
To better understand the unique needs of your business, we'll begin by completing a short survey.
Once you find your perfect match, our team will be happy to guide you through the next steps of the process.
What is a Business Loan?
What is a business loan? Small Business Lenders You pay it back over time, with interest. A business loan is great if you need capital for a specific project, investment, or acquisition that will help your business grow.
A loan usually allows you to borrow more money than your line of credit allows.
In most cases, you will receive the entire loan amount in a lump sum upfront.
Typically, you must secure the loan with collateral such as real estate, inventory, or cash savings.
Some types of business loans can only be used for specific purposes — for example, if you take out an equipment loan, you can't use it to pay employees in months when you're short on funds.
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What is a business line of credit?
A business line of credit is a type of flexible business loan that gives you working capital whenever you need it. A line of credit works like a credit card: you can borrow as much as you need, up to your credit limit, and pay it back over time. A line of credit is ideal for businesses that want ongoing access to funds to stabilize cash flow or meet emergencies.
The line of credit can be used for any business expenses.
Some credit lines are unsecured, meaning you don’t have to provide physical collateral.
Lines of credit tend to be smaller than business loans.
Lines of credit may have additional fees, such as annual fees, withdrawal fees and dormancy fees.
Business Lines of Credit vs. Loans: How to Choose
Generally, a business loan is best for financing a specific project. A line of credit is similar to a credit card, which can be useful if you're looking to raise capital. Working capital as needed.
The best choice for your business will depend on the amount of capital you need, how you want to use the funds, and the loan you qualify for.
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Although it varies widely, a loan usually provides more funds than a line of credit. |
Although they vary greatly, a line of credit is usually smaller than a loan. |
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Specific purpose. In your loan application, you will need to explain how you plan to use the loan funds. |
Can be used for all purposes. |
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Installment Credit – Receive money in a lump sum and pay it back in regular installments over time. |
Revolving Credit – You can carry a balance that accrues interest, pay it off when you can, and then borrow more. |
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They tend to look for good credit, a multi-year business history, and higher annual revenues. |
It is usually easier to pass the screening than a business loan. |
Where to get a business loan or line of credit
Many banks and online lenders offer both business loans and business lines of credit.
Bank Business Loans and Lines of Credit
Typically, Bank loans They are the hardest to qualify for, but also tend to offer the lowest compensation. Interest level You can get financing on the most favorable terms. If you have been in business for years and have good or excellent credit, you should consider bank financing.
National banks that offer business loans and lines of credit include:
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Bank of America offers a wide range of business loan and line of credit products at competitive interest rates, but they can be difficult to qualify for, and the application process may require an interview with a lending professional.
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Tracking We offer business loans and lines of credit up to $500,000 to borrowers with high credit scores (700+). We offer terms of up to seven years for equipment financing and up to five years for lines of credit.
Online Business Loans and Lines of Credit
Online Lenders For new businesses and business owners with fair or bad credit, they tend to get loans faster than banks — sometimes within a day — but interest rates tend to be higher than banks.
Online lenders offering business loans and lines of credit include:
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On Deck They offer business loans of up to $250,000 and lines of credit of up to $100,000, but interest rates may be higher.
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Funding Circle They tend to offer business loans at lower interest rates than other online lenders, but the trade-off is that it can be harder to qualify for the loan and it can take a little longer to get the loan.
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Blue Vine Lines of credit are available to business owners who have been in business for as little as six months, but they may require frequent repayments.
