The core difference
A line of credit lets you draw, repay, and draw again up to a limit, paying interest only on what you use. It behaves like a credit card for your business.
A term loan gives you a lump sum upfront and a fixed repayment schedule over a set term. Once you pay it down, it's gone — you'd apply again for more.
When a line of credit fits
Your cash flow fluctuates month to month and you need to bridge gaps.
You want to pay interest only on the amount you actually use.
You need repeat, on-demand access to capital rather than a one-time purchase.
When a term loan fits
You have a defined, one-time use for the funds — expansion, a large asset, or debt refinancing.
You want predictable repayment you can budget around.
Your cash flow supports a longer-term payment and you don't need to redraw.
Cost and structure
Lines often carry higher rates than term loans but cost less when you use them lightly, since interest accrues only on drawn balances.
Term loans usually have lower rates per dollar but commit you to fixed payments regardless of whether you still need the capital.
Some lines have inactivity fees; some term loans have prepayment penalties. Partner terms differ — we clarify before you commit.
The takeaway
If your need is recurring and flexible, lean toward a line of credit. If it's a one-time investment with a clear use, a term loan is usually the better fit.