When You Need Business Capital — Which Direction Should You Take?

Running a small business means dealing with both planned expenses and surprise situations. Whether you’re stocking inventory, hiring staff, upgrading equipment, or covering an emergency, the type of funding you choose matters just as much as the amount.

At Approvd, two options often come up for small business owners looking to move quickly:

• Business Line of Credit (LOC)
  
  
• Term Loan
  
  

While both options give you access to capital, they work in different ways and support different types of goals. Choosing the wrong one can lead to tight cash flow or unused capital. Choosing the right one can unlock your next stage of growth.

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What Is a Business Line of Credit?

A business line of credit gives you access to a set amount of funds, which you can draw from as needed. It’s similar to a credit card but often comes with better terms and higher limits.

Common Use Cases:

• Managing seasonal slowdowns or sales spikes
  
  
• Buying inventory in smaller, timed batches
  
  
• Covering short-term payroll gaps
  
  
• Emergency equipment repair
  
  

Key Features:

• Only pay interest on the funds you use
  
  
• Flexible access without reapplying
  
  
• Typically shorter terms with faster repayment cycles
  
  

Example:

A women’s clothing boutique in North Carolina draws $8,000 from a $25,000 credit line to stock up ahead of a holiday sale. After quickly repaying the draw with the proceeds, they use another portion to prep for spring arrivals without needing a new loan each time.

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What Is a Term Loan?

A term loan provides a lump sum of capital that is paid back over time, usually with fixed weekly or monthly payments. It’s structured for businesses with a defined project or larger need.

Common Use Cases:

• Restaurant or retail renovations
  
  
• Equipment upgrades or replacements
  
  
• Expanding to a second location
  
  
• Large marketing campaigns
  
  

Key Features:

• Funds delivered all at once
  
  
• Predictable payments over time
  
  
• Ideal for longer-term investments
  
  

Example:

A restaurant in Colorado wants to remodel its kitchen to meet new demand. The business secures a $60,000 term loan to cover the full cost. Payments are automatically debited weekly, and the restaurant immediately sees a return by increasing the number of covers per night.

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Business Line of Credit vs. Term Loan: Side-by-Side Comparison

Business Line of Credit:

• Works as a revolving credit line. You draw, repay, and draw again.
  
  
• Best for recurring needs, seasonal dips, or short-term gaps.
  
  
• You only pay interest on what you use.
  
  
• Offers flexibility but requires solid money management.
  
  
• Lower upfront costs but higher variability in how much you use.
  
  

Term Loan:

• Provides a lump sum with fixed payments and terms.
  
  
• Best for large, one-time purchases or planned investments.
  
  
• You repay in full over a defined period regardless of how the funds are spent.
  
  
• Easier to budget for, but less flexible once the funds are disbursed.
  
  
• Often higher approval amounts if financials are strong.
  
  

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What’s Right for Your Business?

When choosing between the two, ask yourself:

• Do I need capital now for a single project, or ongoing access over time?
  
  
• Can my cash flow handle fixed payments starting immediately?
  
  
• Do I want flexibility to use funds on demand, or structure and predictability?
  
  
• Is this expense urgent, seasonal, or planned?
  
  

If you aren’t sure, Approvd can help you evaluate your real-time business health — based on deposits, revenue trends, and your current needs — to show you the smartest route forward.

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Industry-Specific Trends

Different businesses often lean one way or the other based on how they operate:

• Retail shops often use lines of credit to prep for holiday or back-to-school seasons.
  
  
• Restaurants tend to use term loans for equipment, renovations, or seasonal upgrades.
  
  
• E-commerce brands prefer lines of credit for ad scaling and rolling inventory.
  
  
• Healthcare practices may use term loans for new exam rooms or tech.
  
  
• Construction and contracting companies benefit from term loans to fund upfront labor or equipment costs.
  
  

The right product depends on your industry rhythm, deposit behavior, and how fast you want to grow.

What Makes Funding with Approvd Fast

• Most applications are reviewed within hours, and many businesses are approved the same day.
  
  
• Funding is often available within one to two business days, depending on your state and application type.
  
  
• No hard credit pull is required to see your pre-qualified offers.
  
  
• The process is 100% online, and most businesses only need 3–6 months of business bank statements to get started.
  
  
• Approvd offers multiple product types, including merchant cash advances, business term loans, and revenue-based financing — all with flexible repayment options.
  
  

Final Thoughts

Choosing between a business line of credit and a term loan can feel overwhelming — especially if you’re new to financing or you’ve been denied by a traditional bank.

The good news? At Approvd, we work with businesses in every industry — from food trucks and retailers to wellness clinics and auto shops — to help them get funded in as little as 24 hours, with offers that actually match how they operate.

Find out which option you qualify for today.

Your next opportunity doesn’t have to wait.

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