Line of credit vs term loan
Business line of credit vs term loan for US businesses
Business Lines of Credit at 3%–97.3% (annual rate) against Business Term Loans at 7%–45% (annual rate), compared across 31 US providers on cost, term, speed, and eligibility.
For US businesses deciding between revolving and fixed-term debt, and finance leads structuring a borrowing request.
| Dimension | Business Lines of Credit | Business Term Loans |
|---|---|---|
| Published cost | 3%–97.3% | 7%–45% |
| What the cost measures | Annual rate | Annual rate |
| Typical term | 3 months to 2 years | 4 months to 25 years |
| Fastest published funding | 24 hours | 24 hours |
| Lowest published FICO minimum | 600 | 500 |
| Median published revenue floor | $100,000 | $120,000 |
| Shortest published trading history | 3 months | 3 months |
| Providers compared | 11 | 20 |
| Provider | Product | Published cost | What it measures | Term | Funding speed | Published criteria |
|---|---|---|---|---|---|---|
| Wells Fargo Business Line | Business Lines of Credit | Prime + 1.75% | Spread over prime | Revolving | 1–2 weeks | Requires at least 2 years in business and an existing WF business banking relationship. |
| Bank of America Advantage | Business Lines of Credit | Prime + 2% | Spread over prime | Revolving | 5–7 business days | Requires $100,000+ in annual revenue and an existing BofA business banking relationship. |
| Regions Bank Business | Business Lines of Credit | Prime + 2% | Spread over prime | Revolving | 1–2 weeks | Requires at least 2 years in business. |
| TD Bank Business | Business Lines of Credit | Prime + 2.5% | Spread over prime | Revolving | 5–10 business days | Requires at least 2 years in business and an existing TD business banking relationship. |
| American Express Blueprint | Business Lines of Credit | 3%–9% | Annual rate | 6–18 months | 24 hours | Requires at least 1 year in business and a 660+ FICO score. |
| Fundbox | Business Lines of Credit | 4.66%–8.99% | Annual rate | 12–24 weeks | Same day | Requires at least 6 months in business, $100,000+ in annual revenue and a 600+ FICO score. |
| Bluevine | Business Lines of Credit | 7.9%–15% | Annual rate | 6–12 months | 24–48 hours | Requires at least 1 year in business, $120,000+ in annual revenue and a 625+ FICO score. |
| National Funding LOC | Business Lines of Credit | 9%–30% | Annual rate | 6–24 months | 24 hours | Requires at least 6 months in business and $120,000+ in annual revenue. |
| Chase Business Term | Business Term Loans | 7%–12% | Annual rate | 1–7 years | 2–3 weeks | Requires at least 2 years in business, a 680+ FICO score and an existing Chase business banking relationship. |
| Wells Fargo Term | Business Term Loans | 7%–12% | Annual rate | 1–10 years | 2–4 weeks | Requires at least 2 years in business and an existing WF business banking relationship. |
| Bank of America Term | Business Term Loans | 7.5%–12% | Annual rate | 1–5 years | 2–4 weeks | Requires at least 2 years in business and an existing BofA business banking relationship. |
| Live Oak Bank (SBA) | Business Term Loans | 7.5%–10% | Annual rate | 10–25 years | 4–6 weeks | Requires at least 2 years in business and a 680+ FICO score. |
| SmartBiz | Business Term Loans | 7.5%–10.25% | Annual rate | 10–25 years | 30–60 business days | Requires at least 2 years in business and a 680+ FICO score. |
| US Bank Term | Business Term Loans | 7.5%–13% | Annual rate | 1–7 years | 1–3 weeks | Requires at least 2 years in business and an existing US Bank business banking relationship. |
| Celtic Bank (SBA) | Business Term Loans | 7.75% and up | Annual rate | 10–25 years | 3–6 weeks | Requires at least 2 years in business and a 680+ FICO score. |
| Newtek Business Finance | Business Term Loans | 7.75%–10% | Annual rate | 10–25 years | 3–6 weeks | Requires at least 2 years in business and $50,000+ in annual revenue. |
These costs are quoted on different bases and are not directly comparable
- Spread over prime
- Quoted as a margin above the lender's prime rate, so the all-in cost moves with prime.
- Annual rate
- Quoted as an annual rate on the outstanding balance.
What actually separates them
The choice between revolving and fixed-term debt is really a choice about whether the funding need repeats. A line of credit is drawn, repaid and redrawn against a recurring gap — seasonal working capital, timing differences between payables and receipts. A term loan funds a defined, one-time purpose with a repayment schedule set at the outset.
Using one where the other belongs is a common and expensive error in both directions. Funding a permanent working-capital shortfall with successive term loans produces a refinancing treadmill; funding a long-lived asset from a revolving line leaves the business exposed if the facility is reduced or withdrawn at renewal, which is exactly when conditions are likely to be difficult.
- Business Lines of Credit: 3%–97.3% (annual rate)
- Business Term Loans: 7%–45% (annual rate)
- Business Lines of Credit term: 3 months to 2 years
- Business Term Loans term: 4 months to 25 years
Comparing the published costs
Both products are quoted on the same basis here (annual rate), which makes the published ranges broadly comparable — 3%–97.3% against 7%–45%. Quoted as an annual rate on the outstanding balance.
Broadly comparable is not the same as decisive. The published range excludes arrangement fees, prepayment terms, covenants, security requirements, and reporting obligations, and any of those can move the effective cost more than the difference between these two ranges.
- Spread over prime: Quoted as a margin above the lender's prime rate, so the all-in cost moves with prime.
- Annual rate: Quoted as an annual rate on the outstanding balance.
When each one fits
A line of credit fits recurring, variable, short-duration needs where the balance genuinely returns to zero within the operating cycle. Its value is availability rather than the drawn amount, and pricing should be assessed on expected utilisation rather than the headline rate alone.
A term loan fits a defined purpose with a repayment source that can be identified in advance — an acquisition, a build-out, a refinancing. The fixed schedule is a feature: it forces the amortisation to be matched against the life of what it funds.
Before choosing between them
Compare the full cost of each, not the rate. Lines of credit carry commitment, non-utilisation and renewal terms that do not appear in a quoted spread, and a line that must be renegotiated annually carries a risk a term facility does not.
Caplift's assessment compares structures on a consistent basis using the business's own figures rather than published ranges, and produces a readiness view alongside it. Caplift is not a lender and does not approve, originate, or guarantee financing — the decision remains with the business and its advisors.
Common questions
Questions businesses ask
Is business lines of credit cheaper than business term loans?
Published costs run 3%–97.3% for business lines of credit and 7%–45% for business term loans, both quoted as annual rate. Those ranges overlap enough that the specific structure, term, and fees will usually matter more than the product choice.
Which funds faster, business lines of credit or business term loans?
The fastest published timeline is 24 hours for business lines of credit and 24 hours for business term loans. Published timelines assume a complete file and exclude the preparation time before submission, which is usually the larger part of the calendar.
Which has easier eligibility requirements?
Across the providers compared here, the lowest published FICO minimum is 600 for business lines of credit and 500 for business term loans. Published minimums gate consideration only — approval depends on the whole file, and an easier published threshold usually corresponds to a higher cost or a tighter structure elsewhere.
Does Caplift lend or earn a fee from either product?
No. Caplift Financial Inc. is software and is not a lender. Providers are compared from published information, inclusion is not an endorsement, and appearing here does not indicate a commercial relationship with Caplift.
About this data, and its limits
- Figures are drawn from Caplift's Q1 2026 lender catalogue review and are indicative, not quotes. Curated from named US lenders; confirm individual terms before relying on them.
- Compared across 11 business lines of credit providers and 20 business term loans providers that publish indicative pricing. The provider table below shows the lowest-cost eight from each product; the full sets appear on the individual product guides.
- Inclusion is not an endorsement, a recommendation, or an offer, and does not indicate a commercial relationship with Caplift. Pricing and criteria change without notice — confirm current terms directly with the provider before relying on them.
- Caplift compiles this information to the best of its ability from publicly available provider material, but does not guarantee that it is accurate, complete, or current, and accepts no liability for decisions made in reliance on it. Figures may be out of date or incorrect. Verify anything you intend to act on directly with the provider.
- Caplift Financial Inc. is not a lender and does not approve, originate, or guarantee financing. Nothing on this page is legal, financial, tax, accounting, or investment advice, and it should not be treated as a substitute for advice from a qualified professional who knows your circumstances.