The difference between a business loan and a line of credit
Business loans and lines of credit are both forms of external finance which act as vehicles for injecting cash into your business. External finance can fuel a small business to ride out an unexpected cash flow crunch or take advantage of an exciting growth opportunity.
Like most industries, technology has transformed the business finance sector. As a result, business finance is more readily available. Banks are no longer the only solution.
Fintech lenders, like Reckon Loans partner Prospa, focus on small business financing and leverage technology to deliver faster outcomes than traditional banks. The speed of fund delivery can be vital for a small business to leap on a sudden opportunity or respond to unpredictability.
The two of the most common business finance products that can serve small business needs are a small business loan and/or line of credit.
Business loans explained
A business loan is a set lump sum payment which is provided to a small business, usually for a one-off cash injection. A business loan is delivered in one go and the repayment figure of the loan is understood upfront.
You would usually procure a business loan for an explicit purpose, such as the purchase of a piece of equipment which will in turn increase cashflow.
Lines of credit explained
A line of credit is a little different to a business loan. Think of it as a credit card. You can incrementally utilise a line of credit for a steady drip of cash injection, as you require it.
A line of credit will give you the funds you need, as you need them without committing to a lump sum. It’s great for those who don’t know exactly how much they require need and may have ongoing needs.
For access to business loans and lines of credit check out our small business oriented finance solutions.