<p>Business owners have several choices when it comes to financing their expenses. The most popular choices are business loans and lines of credit. Whether a business loan or line of credit is more advantageous will depend on what you will use the funds for.</p>
<p><img loading="lazy" class="aligncenter size-full wp-image-22513" src="https://tower.10bestbusinessloans.com/wp-content/uploads/2022/11/Cheerful-young-man-bonding-to-his-wife-while-shaking-hand-to-man-sitting-in-front-of-him-at-the-desk.jpg" alt="Cheerful-young-man-bonding-to-his-wife-while-shaking-hand-to-man-sitting-in-front-of-him-at-the-desk" width="600" height="400" srcset="https://tower.10bestbusinessloans.com/wp-content/uploads/2022/11/Cheerful-young-man-bonding-to-his-wife-while-shaking-hand-to-man-sitting-in-front-of-him-at-the-desk.jpg 600w, https://tower.10bestbusinessloans.com/wp-content/uploads/2022/11/Cheerful-young-man-bonding-to-his-wife-while-shaking-hand-to-man-sitting-in-front-of-him-at-the-desk-768x512.jpg 768w" sizes="(max-width: 600px) 100vw, 600px" /></p>
<h3>Revolving Funds vs. One-Time Loan</h3>
<p>When your business loan gets approved, you will get the total amount for the loan and then make scheduled repayments for that amount. This gives you complete access to the funds and allows you to use them for whatever your business needs.</p>
<p>Although it also gives you access to funds, a line of credit is different from a loan. When you apply for a line of credit, you want to access revolving funds. This is comparable to credit cards or home equity lines of credit. You are allowed to borrow a specific amount of money. You can withdraw only the amount you need or get all the funds upfront.</p>
<p>Business loans provide one-time access to funding. Lines of credit are sources of funds that you can use given that you have available credit. When you repay your debt on your credit line, the available credit will be replenished.</p>
<div class="buttono-wrapper" style="max-width:98%;" data-style-params="backgroundColor=%23f5f5f5&buttonHoverColor=%231c836f&borderColor=%23f5f5f5&textColor=%232d2d2d&buttonColor=%23ffffff&buttonBackgroundColor=%2325b296" offer-id="432" data-promoe-image-src="https://10bestbusinessloans.com/?p=24309" data-logo-src="https://tower.10bestbusinessloans.com/wp-content/uploads/2022/04/Fundera-logo.svg" data-promote-text="Minimum credit score: 620" data-button-text="Get Rate " data-partner-link="https://fundera.34rwxn.net/c/2213888/1088562/10988?subId1=" data-kidon-id="425" data-offer-link="https://fundera.34rwxn.net/c/2213888/1088562/10988?subId1=&offer_id=432&offer_name=Fundera" data-conversion-label="QuO1CLS_xIEYEKr4-oYp"><meta name="viewport" content="width=device-width, initial-scale=1" ><meta data-type="partner" ><div class="background-wrapper" style="background:#f5f5f5""><div class="border-wrapper" style="border-color:#f5f5f5"> <div id=662b6d765ab25 class="buttono-content" ><div class='buttono-logo__container'><a href='https://fundera.34rwxn.net/c/2213888/1088562/10988?subId1=' target='_blank'><img src='https://tower.10bestbusinessloans.com/wp-content/uploads/2022/04/Fundera-logo.svg' class='buttono-logo' style='width:50px; height:44px;'></a></div> <div class="main-content"><div class='col-md-6'><a href='https://fundera.34rwxn.net/c/2213888/1088562/10988?subId1=' target='_blank' class='buttono-promote-text__container'><p class='buttono-promote-text' style='color:#2d2d2d'>Minimum credit score: 620</p></a></div><div class='buttono-link-container'><a href='https://fundera.34rwxn.net/c/2213888/1088562/10988?subId1=' target='_blank' style='background-color: #25b296; color: #ffffff ' class='buttono-link'  > Get Rate </a></div></div></div><a href='https://fundera.34rwxn.net/c/2213888/1088562/10988?subId1=' target='_blank'><img class='buttono-image' src=https://10bestbusinessloans.com/?p=24309></div></a></div></div>
<h3>Loan Structure</h3>
<p>For business loans, the repayment schedule is usually set monthly. You will be required to start payments within 30 days until the loan is paid in full. The loan payment amount does not change even if your loan balance decreases.</p>
<p>If you choose a line of credit, you only need to pay the outstanding balance instead of having a fixed amount monthly. So your total payment monthly will vary depending on the amount that you borrow. The line of credit may require monthly payments on the interest. Other lenders will require you to pay a specific principal amount plus interest. Your monthly payments can increase or decrease when you pay your outstanding balance or as use up more credit.</p>
<h3>Loan Terms</h3>
<p>Business loans are also called term loans because you need to pay the amount over a prearranged length of time. This can last up to 20 years depending on the terms of the loan.</p>
<p>Repayment for a line of credit is not based on a set term but on the balance that you owe. If your lender requires you to pay 2% of your outstanding balance every month and you borrowed $5,000, you will need to pay $100 per month. if you withdraw another $5,000 from your line, your balance is now $10,000 and your monthly payment will be $200.</p>
<p>Business loans typically have higher monthly payments than lines of credit. You would need to pay off the loan in a comparatively shorter period.</p>
<p><img loading="lazy" class="aligncenter size-full wp-image-22514" src="https://tower.10bestbusinessloans.com/wp-content/uploads/2022/11/Small-Business-Loan-Form-Tax-Credits-Niche-Concept.jpg" alt="Small-Business-Loan-Form-Tax-Credits-Niche-Concept" width="600" height="400" srcset="https://tower.10bestbusinessloans.com/wp-content/uploads/2022/11/Small-Business-Loan-Form-Tax-Credits-Niche-Concept.jpg 600w, https://tower.10bestbusinessloans.com/wp-content/uploads/2022/11/Small-Business-Loan-Form-Tax-Credits-Niche-Concept-768x512.jpg 768w" sizes="(max-width: 600px) 100vw, 600px" /></p>
<h3>Loan Fees</h3>
<p>Business loans and lines of credit have different fees. A business loan will usually have some upfront fees such as an origination fee. This fee is a percentage of your business loan amount and can be from 1 to 6 percent of the total amount.</p>
<p>A line of credit doesn’t usually have origination fees because it’s a credit line and not a fixed loan. However, there can be draw charges every time you withdraw from the line. The draw fee is a fixed amount. If you draw from your credit five times within the year, you would pay $250 on charges.</p>
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<h3>Loan Purposes</h3>
<p>Now let’s look at the purposes of each type of loan so you can determine which type works best for you. It all depends on what you are going to do with the funds. A business loan is recommended if you need funding for long-term capital expenses such as business equipment. Equipment will last several years so you can match your loan term to the expected number of productive years for that specific asset. By doing so, you can avoid out-of-pocket expenses for your equipment. You can also spread the original cost over a number of years.</p>
<p>Lines of credit are more advantageous for those who need working capital. You can use this to cover short-term operating costs such as payroll, inventory, or a huge expense that you expect in the future. A line of credit can also become an extra source of funds to cover these costs. You do not need to use the balance until you need to pay the bills. You can repay your outstanding balance on the line when your business income catches up with the costs.</p>
<p>You can open a line of credit even before you need it while you should apply for a business loan if you have a specific and necessary capital expenditure. Lenders will require loan applications to specify a purpose. Lines of credit can be treated as reserve funds when your income is unstable. Determine what type of expense you need to fund so you can choose between a loan and a line of credit.</p>


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<p>10bestbusinessloans.com is a free online platform designed to help users with the process of choosing the services or products that meets their needs by providing helpful reviews, articles and comparison based content. We receive compensation from the various brands we review, compare and rank on the website. 10bestbusinessloans.com is not a lender, broker or financial institute, nor a party to any engagement related to financial products or transaction. All rates, fees and offers&#8217; terms presented herein are provided by the third party brands we engage with, which may include lenders, brokers and aggregators. We do not make any decision regarding such rates, fees, terms and eligibility or approval of a financial offer.  The actual offer you will receive is subject to its provider&#8217;s sole discretion including credit score, minimum deposit, minimum balance, requested loan amount, loan term, etc. and there is no guarantee you will qualify for the rates, fees, or terms presented herein. The content herein is not, and shall not be taken as an endorsement, recommendation or solicitation to borrow or obtain any financial service. We encourage you to carefully review the actual offer&#8217;s terms you receive from the provider, including all associated fees and costs. Filing for bankruptcy shall not exempt from repayment obligations.</p>
<p>Annual Percentage Rate (“APR”) is the yearly cost of borrowing from a financial institution, represented as a percentage. The APR includes fees related to originating the loan, not just the interest payments (such late fees, closing fees and administrative fees). Repayment examples (<u>for illustrative purposes only</u>): a $20,000 loan at 6.00% APR with a term of 5 years would result in 60 monthly payments of $387 (Total repayable: $23,199)<span dir="RTL"> </span>and a $100,000 loan at 3.00% APR with a term of 4 years would result in 48 monthly payments of $2,213 (Total repayable: $106,245).</p>
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