A business line of credit is revolving capital: you draw what you need, repay it, and the availability typically comes back so you can draw again. A term program is one lump sum, repaid on a schedule spelled out before you sign. The line fits gaps that keep coming back; the term program fits one dated purchase with a payback you can see.
What’s the difference in one sentence?
A line is capital you draw and reuse; a term program is capital you take once and repay on a set schedule. NerdWallet describes a business loan as a lump sum you receive and pay back over time with interest, and a line of credit as “a pool of money that you can keep dipping into, up to a limit.” Bankrate draws the pricing line the same way: a loan charges interest on the entire amount, while a line charges it only on the amount used, and as you make payments the line replenishes so you can draw again.
Everything else about the choice follows from that one difference. A line answers a need that repeats, or one you can’t put a date on. A term program answers a need you can name, price, and schedule today.
When does a line of credit fit?
A line fits when the gap keeps coming back, when the timing is uneven, or when the next opportunity is real but you can’t date it yet. A contractor whose material bills land between job draws has the same gap every month; a line lets the business draw, repay from the draw check, and draw again without re-applying. A retailer who buys when a supplier clears inventory has an opportunity that shows up without warning; a line sits ready for it. A business with a slow season and a strong one behind it can draw ahead of the season and repay as it turns.
The Federal Reserve Banks’ 2025 Report on Employer Firms, drawn from the 2024 Small Business Credit Survey, found that 37% of small employer firms applied for a loan, line of credit, or merchant cash advance in the prior 12 months, and the most common reason for seeking financing was meeting operating expenses, cited by 56% of those firms. Operating expenses are the textbook case for a business line of credit: recurring, uneven, and rarely the size of a project.
One exception. If the cash you’re waiting on is sitting in unpaid business invoices, the money already exists; it’s just late. That is usually a factoring question, not a line question — see how invoice factoring works.
When does a term program fit?
A term program fits when there is one dated purchase or project and you can see how it pays back. A buildout costs what it costs. A machine has a price and a delivery date. A job you’ve already won has a contract value and a payment schedule on the other side. In each case the number is known, so the payment can be sized to the runway the project actually needs instead of squeezed into whatever a line’s repayment schedule happens to be.
That is why the term program is the longer-runway tool. Working-capital and term programs typically range up to 2X monthly revenue, depending on how the file looks, and terms run out to 48 months at the ceiling — most files land 12–24. The same Federal Reserve report found that 46% of firms seeking financing wanted it for an expansion or a new opportunity, and an expansion is exactly the kind of dated, sized need a term program was built for.
How is each one priced?
A line is priced on what you draw; a term program is priced on the whole amount, on a schedule you see before you sign. With a line, cost is tied to the balance you’re actually using, not the unused limit sitting ready, though NerdWallet notes that lines can also carry annual, draw, or inactivity fees. Revolving convenience typically prices above a fixed bank line, and a bank line, if the bank will write one in time, is usually the cheaper tool.
With a term program, the amount, the term, and the payment are spelled out before anything is signed, and rates can start around 1% a month for the strongest files, depending on the file. Regulators are pushing both structures in this direction: New York’s Department of Financial Services adopted a commercial-financing disclosure regulation in 2023 that sets standardized disclosure formats for six financing types, including open-end and closed-end financing, so that a business can “understand and compare the terms.” Every figure in this guide is an illustrative range, not a quote. What your file supports is the review desk’s answer, not a web page’s.
The discipline problem with lines
The hardest part of a line isn’t qualifying for it; it’s leaving it alone. Easy draws can become a habit the file did not budget for. Bankrate puts the risk plainly: because you can draw up to your available credit as needed, “you can easily get into a cycle of debt if you withdraw multiple times without repaying past loans in a timely manner.” The line was approved on a file that showed a certain payment load, and a balance that never quite goes back to zero quietly changes that file.
The fix is a rule, written before the first draw: what a draw is for, and which deposit repays it. A draw for materials on a job is repaid by that job’s check. A draw for a slow month is repaid by the strong one. A draw with no named repayment is the one to skip.
Why a line doesn’t last forever
No honest desk will promise a line for life, because the line is built on the file and files change. A healthy line is built to stay with the business, and lines are reviewed periodically as the file evolves: a growing business often supports a growing limit, and a file that weakens can support a smaller one. Bankrate notes that lines from online lenders typically carry repayment terms of six to 24 months, with two or more years at banks, so even the calendar on a line is finite. Treat the line as something the business keeps earning, not something it owns.
What if you hold both?
Plenty of businesses hold a term program for the dated project and a line for the timing gaps, and that is a sound structure when the file supports it. The catch is that underwriters read the combined payment load. Existing payments are part of the overall health of the file, and two structures stacking on one revenue line can crowd it. Whether a file supports both at once is the review desk’s call, made from your real numbers.
One rule keeps the pair honest: never use the line to make the term payment. That is the discipline problem wearing a suit. If the term payment needs the line, the term was sized wrong, and the conversation to have is about the term, not about a bigger line.
Which one fits your situation?
| Your situation | Usually fits | Why |
|---|---|---|
| Materials and payroll land between job draws, month after month | Line of credit | The gap repeats: draw, repay from the job check, draw again |
| One buildout, machine, or second location with a price tag | Term program | The number is known and the payback is visible, so the payment can be sized to the runway |
| A slow season you can date, with a strong one behind it | Line of credit, or revenue-based financing | Draw ahead of the season and repay as it turns; if the swing is large, a payment that follows revenue may fit better |
| A supplier discount that shows up without warning | Line of credit | The opportunity can’t be dated; the line sits ready and costs little while it waits |
| A job already won that needs materials and crew before the first check | Term program | Dated, sized, and repaid from a contract you can see |
| Cash tied up in unpaid business invoices | Neither first; look at factoring | The money exists; it’s just late |
| Steady revenue, one gap, nothing like it expected again | Term program | A line you’d use once buys the habit risk for nothing |
| A cushion standing by, with no need today | Line of credit | Cost is tied to what is drawn, not to the limit sitting ready |
Where Aglet fits
We run both structures: a business line of credit with limits that typically scale with monthly revenue and cost tied to what is drawn, and working-capital and term programs that typically range up to 2X monthly revenue, with terms out to 48 months at the ceiling and most files landing 12–24. The review desk looks at your real numbers, meaning time in business, monthly revenue, and the overall health of the file, and tells you plainly which one your file supports. It’s fine if the answer is neither.
We’re not the cheapest desk. Files that fit usually leave with a longer term and one payment instead of three — and you’ll know exactly what it costs before you sign anything. If your bank can write the line or fund the project in time, take it. If it can’t, the quick assessment takes two minutes, no documents, and shows what programs typically reach for a file shaped like yours.
Sources
- NerdWallet, Business Loan vs. Line of Credit: Which Is Right for You? — Generic definitions: a loan is a lump sum repaid over time; a line is a pool of money you keep dipping into up to a limit; lines can carry annual, draw, or inactivity fees.
- Bankrate, Business loan vs. line of credit — Interest is charged on the whole loan versus only the amount used; lines replenish as payments are made; typical line repayment terms of 6–24 months online and two or more years at banks.
- Bankrate, Pros and Cons of Using a Business Line of Credit — The cycle-of-debt risk of repeated draws without timely repayment.
- Federal Reserve Banks, 2025 Report on Employer Firms: Findings from the 2024 Small Business Credit Survey — 37% of small employer firms applied for a loan, line of credit, or merchant cash advance in the prior 12 months; top reasons were meeting operating expenses (56%) and pursuing an expansion or new opportunity (46%).
- New York Department of Financial Services, press release on the commercial financing disclosure regulation (Feb. 1, 2023) — Standardized disclosure formats for six financing types, including open-end and closed-end financing, so a business can understand and compare the terms.