The primary difference between a business loan and a business line of credit is flexibility. A business loan provides a specific amount of money for a definitive transaction, with fixed monthly payments and payback term. A business line of credit operates comparable to a credit card: a credit limit is established that enables you to borrow against at your convenience. Repayment terms vary dependent upon the outstanding balance of the credit line. Business lines of credit require a more thorough underwriting process however the application process is comparable to that of a business loan.
Advantages of Line of Credit Financing
- Flexible advances
- No fixed contract or prepayment penalties