Business Line of Credit
A flexible borrowing facility allowing draws up to a preset limit, with interest charged only on the outstanding balance. Ideal for managing cash flow gaps, seasonal inventory, and unexpected expenses. Revolving lines reset as you repay; non-revolving lines are one-time.
**Installment or revolving?** A business line of credit is **revolving** credit (the same category as a credit card): repaying a draw restores your available limit, so you can borrow again without a new application. That is the key difference from a term loan, which is **installment** credit paid down on a fixed schedule and closed when repaid. A "non-revolving" line is the exception: it lets you draw in pieces up to a cap, but repaid amounts do not become available again.
**How draws are repaid:** most lines charge interest only on what is drawn, billed weekly or monthly; some online lenders convert each draw into its own short amortizing schedule (6, 12 or 18 months), which behaves like a series of mini installment loans inside a revolving limit. Annual or monthly maintenance fees, draw fees, and inactivity fees are common, so compare the total cost of a typical draw rather than the headline rate.
**Secured vs unsecured:** bank lines are often secured by a blanket lien or receivables and priced lower; online lines are usually unsecured, faster to open, and more expensive. Lines typically renew annually and the lender can reduce the limit if your financials weaken. See also: revolving credit facility, term loan, draw period.
Term Loan
A lump-sum loan repaid in fixed installments over a set period (1-25 years). Interest can be fixed or variable. Best for specific, one-time investments: equipment, expansion, acquisition. Online term loans: 3-36 months; bank term loans: 1-10 years; SBA: up to 25 years.
**Is a small business loan installment or revolving?** A term loan is **installment** credit: you receive the full amount once and repay it on a fixed schedule until the balance hits zero, and you cannot re-borrow what you have repaid without applying again. A business line of credit is the **revolving** kind: you draw, repay, and draw again up to a limit. Most products marketed simply as "small business loans" (bank term loans, SBA 7(a) and 504 loans, online term loans, equipment loans) are installment loans; lines of credit and business credit cards are revolving.
**Why the distinction matters:** installment loans usually carry lower rates and predictable payments, and they suit one-time purchases with a clear payback period. Revolving credit costs more per dollar drawn but only charges interest on what is outstanding, which suits recurring cash-flow gaps. On business credit reports, a paid-down installment loan builds payment history, while a revolving line also affects utilization.
**Typical term-loan structure:** principal + interest amortized monthly (sometimes weekly for online lenders); origination fee of roughly 1-5% deducted at funding; prepayment terms vary (some online lenders charge the full remaining interest regardless of early payoff, so read the note). See also: business line of credit, amortization, prepayment penalty.