Quick answer: A business term loan is best for a one-time expense with a clear cost, like a renovation, expansion or large purchase. A business line of credit is best for ongoing or unpredictable needs, like covering payroll in a slow month or buying inventory before a busy season. Many businesses use both: a term loan for the big project and a line of credit as a cash-flow safety net.
Term loan vs. line of credit at a glance
| Business term loan | Business line of credit | |
|---|---|---|
| How you get the money | One lump sum up front | Draw what you need, when you need it, up to a limit |
| Interest | On the full amount borrowed | Only on what you’ve drawn |
| Repayment | Fixed payments over a set term | Payments based on your balance; credit frees up as you repay |
| Best for | Renovations, expansion, equipment, hiring, one-time projects | Cash-flow gaps, seasonal inventory, payroll, emergencies |
| Predictability | High — same payment every period | Varies with how much you use |
| Speed at Brookestone | Same day to 2 days | 1–3 days |
When a term loan makes more sense
- You know the exact cost, such as a $150,000 remodel.
- You want a fixed payment you can plan around.
- The purchase will pay off over months or years, like a second location or new equipment.
When a line of credit makes more sense
- Your revenue is seasonal or customers pay on 30- to 90-day terms.
- You want a cushion for emergencies without paying interest until you use it.
- You make repeated purchases, like inventory, materials or fuel.
Example
A landscaping company needs $80,000 for two new trucks and also struggles every winter when revenue drops. A term loan for the trucks gives it a fixed payment tied to equipment that earns money for years. A separate line of credit covers winter payroll and is paid back in the spring, so the company only pays interest during the months it actually uses the line.
Costs to compare
For either product, compare the total amount you’ll repay, any origination or draw fees, the payment frequency, and whether there’s a penalty for paying early. At Brookestone Funding, term loans and lines of credit range from $10,000 to $2,000,000 with terms up to 36 months and rates starting at 8% for qualified businesses.
Qualifying for either option
Brookestone Funding’s minimums are 2+ years in business, $30,000+ in monthly revenue, a 600+ credit score and recent business bank statements.
Related Guides
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- How Much Business Loan Can I Get? Amounts Based on Your Revenue
- Invoice Factoring vs. Line of Credit: Which Is Right for Your Business?
- How to Get Approved for a Small Business Loan: 12 Tips That Work
- APR vs. Interest Rate vs. Factor Rate: How to Compare Business Loan Costs
Frequently Asked Questions
Is a term loan or line of credit cheaper?
It depends on how you use it. A line of credit is often cheaper for short-term needs because you only pay interest on what you draw. For a large one-time purchase, a term loan usually gives a better fixed rate and predictable payments.
Can I have a term loan and a line of credit at the same time?
Yes. Many businesses use a term loan for a specific project and keep a line of credit available for cash-flow gaps, as long as the combined payments fit their revenue.
How fast can I get a business line of credit?
At Brookestone Funding, lines of credit are typically set up within 1–3 days for qualified businesses.
What credit score do I need for a business line of credit?
Brookestone Funding considers businesses with a 600+ credit score, 2+ years in business and $30,000+ in monthly revenue.
Ready to see what your business qualifies for? Brookestone Funding offers business term loans, lines of credit and SBA loans from $10,000 to $2,000,000, with same-day funding available for qualified businesses. Apply in minutes, see our business loan options, or call 212-258-0602.
