BUSINESS LINE OF CREDIT VS. BUSINESS LOAN
Two cash-infusion options to grow or steady your business
Find the right financing solution for day-to-day operations or long-term growth.
Should I get a business loan or line of credit?
Start by defining your needs. A business loan might be the preferred option for bigger plans that require more money and time. Things like new construction, facilities expansion or expensive machinery purchases are all good fits for business loan financing. Shorter-term cash-flow needs such as covering payroll or bill payments are better aligned with a business line of credit.
At M&T Bank, we understand that each small business owner’s situation is unique. Our Business Banking Specialists are available to guide you to the solution that best serves your needs to help secure funding.
Business Line of Credit vs. Business Loan — pros and cons
One great advantage to a business loan is that you can lock in a fixed interest rate, which provides an exact amount for your monthly budget. You can also likely access more capital through a business loan than a line of credit. However, business loans are generally limited to the specific use you identified when qualifying for the loan. A business loan is an installment loan, which means that regular payments will be due and interest on the full borrowed amount will be owed over the term of the loan. Think of a business loan like a home mortgage.
If you need flexibility with the money you borrow, a business line of credit makes more sense. Like a credit card, a revolving business line of credit allows you to quickly draw the financing you need for any reason. You’ll pay interest only on what you use. If you’re able to pay the balance in full each month, a line of credit can amount to an excellent, affordable short-term cash infusion. However, interest on carry-over balances can add up quickly, so it’s important to have a plan in place for use and repayment of your line of credit financing.