Line of Credit vs. Term Loan: Which Is Right for Your Business?

Deciding between a line of credit and a term loan? This blog breaks down the key differences so you can choose the right fit for your business. Whether you need flexible access to cash for ongoing expenses or a lump sum for a major investment, we’ll help you understand when and why each option makes sense. Plus, see how Arborly connects you to 25+ lenders to find the structure that best supports your growth goals.

Published on :

May 17, 2025

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‍Intro:

Business funding isn’t one-size-fits-all. Choosing the right type of capital—whether a line of credit or a term loan—can impact your flexibility, repayment, and long-term growth. Here’s how to make the right call for your needs.

What’s a Line of Credit?

Think of it as a credit card for your business.
You get access to a set amount of funds that you can draw from as needed.
You only pay interest on what you use.
Ideal for covering short-term needs like payroll, inventory, or seasonal dips.

What’s a Term Loan?

You receive a lump sum upfront and repay it over a fixed schedule.
Payments are typically monthly and include principal + interest.
Best for large investments like equipment, renovations, or expansion projects.

When to Use Each:

Line of Credit: Great for recurring, smaller expenses or managing cash flow gaps.
Term Loan: Perfect for one-time projects with a clear cost and ROI.

How Arborly Helps:

We help you evaluate your goals, cash flow, and repayment comfort to find the structure that suits your business best. With access to over 25 lenders, Arborly makes sure you’re not limited by a one-size-fits-all loan offer.

Need flexible funds or long-term capital? Start your application with Arborly and find your best-fit solution today.

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