Why a Business Line of Credit is Better than a Loan

For business owners concerned about having working capital to cover expenses to run, build, or grow their enterprise, it may be confusing to hear the terms “business loan” and “business line of credit”.

Some may think that the two are interchangeable, but they greatly differ. Each serves a unique purpose that can be harnessed to push any business to the next level- if used correctly.

Knowing the differences between the two phrases will assist business owners to make the right decision when additional cash flow is required.

why a business line of credit is better than a loan

Differences Between a Business Line of Credit and a Business Loan

A business line of credit offers greater flexibility to business owners relative to how the funds may be used and the fact that it is not a loan. Additional differences include:

  • Business loans are used only once for a specific purpose whereas a line of credit may be used multiple times.
  • Timing is everything: as loans fulfill specific purposes, one does not apply for a business loan until the need arises. Meanwhile, a line of credit is applied for prior to requiring the financing. It is available, for any purpose, when needed.
  • Business loans require monthly payments. Unless it is for a loan with flexible terms, the same amount will be charged monthly until repaid. With a line of credit, borrowers only make payments based on the amount of money borrowed.
  • Business loans are best for long-term financing; lines of credit are best for resolving short-term cash flow bottlenecks of less than a year.

Is a Business Line of Credit Right for You?

Most urgent business financial requirements call for short-term cash infusions. That is where a Business Line of Credit is the best financing vehicle.

The Business Loan is used for long-term financing, which offers terms up to five years, is ideal to underwrite equipment purchases.

These are by no means the only financing options available. National Business Capital & Services can assist your business to obtain the right financing you require.

Still Can’t Decide Between Applying for Business Credit Lines or Loans?

For a confidential business review and sound financial guidance, please contact us. We welcome your call at (877) 482-3008.

Or, fill out a 1-minute application to get started right away, and receive funding from your small business loan or credit line in as little as 24 hours.

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!

About the Author, Megan Capobianco

Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.