Business Loans vs Business Lines of Credit Compared
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What Is a Business Loan?
Types of Business Loans
Rates: 3% to 7% Loan amount: $5,000 to $5 million Terms: Up to 10 years
Small Business Administration Loans
Rates: 7.75% to 13.5 Loan amount: up to $5.5 million Terms: up to 25 years
Merchant Cash Advance Loans
Rates: 1.14 to 1.48 Factor Rate (which roughly converts into an annual percentage rate of 5% to over 100%) Loan amount: up to $500,000 Terms: however long it takes to cover the advance you received (plus fees) through sales
Pros and Cons of Small Business Loans
Pros of a Business Loan
Cons of a Business Loan
What Is a Business Line of Credit?
Rates: 4.66% to 47.14% Credit line amount: $1,000 to $250,000 Terms: up to five years
Pros of a Business Line of Credit
Cons of a Business Line of Credit
Small Business Loan vs Line of Credit Compared
Similarities Between Business Lines of Credit vs Loans
Access to capital: Both business loans and lines of credit give your business cash to accomplish a goal. Lenders: Both loans and lines of credit are offered through traditional banks, credit unions, as well as online lenders. Rates depend on your credit: Requirements differ between loans and lines of credit, but with both, the stronger your credit scores, business history, and revenue, generally the better rates and terms you can expect.
Differences Between Business Lines of Credit vs Loans
How to Choose Between Business Loans vs Lines of Credit
Exploring Business Loan Options
How much money do I need? Loans may be a better choice if a large sum is needed. What will I use the money for? Business loans generally come with restrictions attached to what the funds can be spent on. Do I need it all at once or spread out over time? A loan amount can be disbursed as a lump sum and a line of credit tapped into only when needed. How much can I afford to pay in loan payments each month? A line of credit could require fewer payments, if only some of the approved financing gets withdrawn. When do I need the financed money? If you need access to funds at different times, a line of credit may offer more financing flexibility — as it can be tapped when needed. What financing options do I qualify for? If you’re not certain whether you qualify for a business loan or line of credit, you can research different lenders' requirements to get a better idea of the various factors they weigh.
Business Loans That Suit Your Needs
Frequently Asked Questions
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