Business Loans

Term Loan vs Working Capital: Which Is Right for Your Business?

The useful distinction is not which product sounds easier. It is which repayment rhythm matches the life of what you are funding.

Working capital

Funds that rotate: stock, debtors, the gap between paying suppliers and collecting from customers. Limits are typically reviewed and should be justified by the cycle.

Term loan

Funds that stay: a machine, a shed, a capacity expansion. Repayment is meant to come from profits or cash generation over years, not from next month’s collections alone.

The common mismatch

Using cash credit to buy plant looks convenient and quietly tightens liquidity. Using a long tenor for a three-month seasonal spike can cost more than it should. Structure follows purpose.

This is general guidance, not a product recommendation. Lender assessment applies.