Line of credit vs. term loan

Both fund an established business. One is a reusable limit you draw on; the other is one amount on a fixed schedule.

A Business Line of Credit

A revolving limit. Draw what you need, pay interest only on what's drawn, repay, and draw again. Fits uneven cash flow, inventory cycles, and opportunities you can't schedule.

A Business Term Loan

One amount, repaid on a fixed schedule. Fits a planned purchase, an expansion, or a one-time project where you know the number up front.

Same qualification picture

Both are document-based products. TK generally looks for a personal credit profile of 650 or higher, negatives ideally two or more years old, and bank statements that show consistent revenue. TK Capital Solutions is a funding brokerage, not a lender. Requirements vary by lender and program; nothing here is a promise of approval, amount, or timing.

The difference in one sentence

A term loan is one amount, borrowed once, repaid on a fixed schedule until it is gone. A line of credit is a limit you can draw against, pay down, and draw against again, paying interest only on what you have actually used.

That single difference - fixed and finite versus revolving and reusable - drives everything else about how the two products behave.

When a term loan is the right shape

Term loans fit a specific need with a number already attached to it. Opening a second location. A major renovation. Buying out a partner. Consolidating expensive existing debt into one manageable payment.

The predictability is the point: a defined amount, a defined payment, and a defined end date you can plan around. What a term loan does badly is cover a gap that keeps reopening - taking a lump sum to solve a recurring shortfall usually means carrying debt you did not need for months at a time.

When a line of credit is the right shape

Lines of credit fit businesses whose money arrives unevenly even though their bills do not. Customers pay on net 60 while suppliers want net 15 and payroll lands every two weeks regardless. A line smooths that out without locking the business into a fixed payment in the months it does not need one.

Common uses: working capital, payroll, inventory, marketing, expansion, cash-flow management, and short-term or unexpected expenses. It is also common for businesses that simply want capital available before an opportunity appears, rather than scrambling after it has.

What qualification looks like for both

Both are document-based products, so the whole picture matters rather than any single number. As a general guideline: personal credit typically 650 or better, negative items ideally at least two years old, and revenue, profitability, existing debt, time in business, cash flow and tax returns all feeding into both the approval and the size of the facility.

One difference worth knowing: a term loan file usually asks for more than a line of credit file. Expect bank statements, business and sometimes personal tax returns, a profit and loss statement, a balance sheet, a debt schedule and formation documents. Any existing merchant cash advance balances matter here more than almost anywhere else.

Choosing between them

One purchase with a price on it - term loan.
A gap that reopens every month - line of credit.
You want the money available but not drawn - line of credit.
You want a fixed payment and a finish date - term loan.

If the honest answer is both, it is usually worth talking it through rather than guessing. These are general guidelines, not approval requirements, and lender standards vary.

Common questions

Can I have both?: Some businesses run a line for working capital and a term loan for a specific purchase. Whether that's sensible depends on cash flow and existing obligations.