Line of Credit vs. Working Capital Loans: Compare Business Funding
Business line of credit vs. working capital loans — compare the two most common short-term business financing tools.
Business Line of Credit: A revolving business line of credit lets you draw funds as needed up to a set limit and only pay interest on what you use. Working Capital Loan: A working capital loan covers day-to-day operational expenses — payroll, rent, supplies — giving businesses the cash flow cushion they need to operate smoothly.
Business Line of Credit vs. Working Capital Loan — side by side
| Business Line of Credit | Working Capital Loan | |
|---|---|---|
| Typical amount | $10,000 – $500,000 | $10,000 – $500,000 |
| Typical term | Revolving (12 – 24 month draw period) | 6 – 36 months |
| Rate | 8% – 36% APR | 10% – 40% APR |
| Minimum time in business | 6 months | 6 months |
| Minimum credit score | 580+ | 550+ |
Which is right for your business?
- Business Line of Credit tends to fit best when you need ongoing cash flow or seasonal inventory.
- Working Capital Loan tends to fit best when you need payroll or rent.
Frequently asked questions
Is a line of credit always better than other working capital products?
For businesses that qualify, yes — a revolving line is typically cheaper and more flexible. But qualification matters: if you can only access a working capital loan at 40% APR versus a credit line you don't qualify for, the working capital loan is better than nothing while you build toward the line.
