Line of credit or term loan?
A line of credit is a limit you draw on and repay as needed; a term loan is one sum paid out once and repaid on a fixed schedule. The lender decides what it proposes, in its written offer.
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- What is the difference between a line of credit and a term loan?
- A line of credit is a revolving limit: you draw on it, you repay, and the amount becomes available again. A term loan pays out one sum, repaid in instalments until the end of the term.
- When does a line of credit or a term loan come up?
- A line of credit answers a need that comes back, such as a gap between expenses and collections. A term loan answers one specific expense known in advance, such as a purchase or a renovation.
- What does each one ask of the business?
- For a line of credit, lenders usually look at time in business, credit and the regularity of deposits; for a term loan, at the capacity to carry a fixed payment for the whole term. Each lender sets its own thresholds.
- Line of credit or term loan: which one for my business?
- It depends on the need: one that returns month after month looks like a line of credit’s, a single expense like a term loan’s. We present your file to the lenders you authorize, and each lender says in its written offer what it proposes.
What the lender looks at
- Actual deposits, month by month
- Line or loan, the reading starts with what the business takes in.
- Days in overdraft
- A frequent overdraft shows a need that comes back, which each lender reads in its own way.
- Payments to other lenders
- Repayments under way count in what a new fixed payment can carry.
- How long the business has been operating
- Each lender sets its time-in-business threshold, product by product.
$0 upfront · 7% only if funded
An intermediary, not a lender.
The lender sets the final amount and its cost in its written offer.
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