Line of Credit, Q&A

Q&A: What’s the Difference Between a Business Line of Credit versus a Business Loan?

Business line of credit versus a business loan — The business line of credit is in fact a business loan, but the difference is that the business loan is made at a fixed rate and the business line of credit is made at a certain percentage over prime rate. Typically, the business line of credit interest rate is usually lower than the standard business loan rate…but not always. Uses of the business loan and the business line of credit may vary as well. With a business loan, you may take out the loan to pay for new improvements and equipment at your new office. The loan is paid back over a specific period of time at typically a fixed rate and a fixed sum each month. The business line of credit can be used to pay a large supplier bill or to buy supplies as the season foryo0ur business begins and then pay back the line of credit account as the season proceeds. The line of credit can also act as an emergency source of funds if the truck breaks down on the highway a needs emergency repairs or the customer’s check failed to arrive on time and you need to meet payroll.