Term loan, line of credit or advance?
The right product is decided by what the money is for and how long you need it, not by which one you can get fastest. One table sorts it.
Most owners pick a product because it is the one a particular lender happens to sell. That is backwards, and it is expensive.
The Federal Reserve found that firms seek financing for two main reasons: to meet operating expenses, and to pursue an expansion or a new opportunity. Those two answers point at completely different products.
Start with the shape of the need
Before comparing prices, answer two questions: is this a one-off or a recurring gap, and how long before the money pays for itself?
Federal Reserve Banks, 2026 Report on Employer Firms, from the 2025 Small Business Credit Survey. Firms could give more than one reason.
A rolling need financed with a one-off product is how businesses end up borrowing again three months later.
The five products, side by side
| Product | Best when | How you repay | Watch for |
|---|---|---|---|
| Term loan | A one-off cost with a clear payback | Fixed payments, fixed end date | Hardest to qualify for, slowest to arrive |
| Line of credit | Gaps that recur through the year | Only on what you draw | Can be reduced or withdrawn by the lender |
| Revenue-based advance | You need it now and your takings are strong | A share of daily or weekly deposits | Costs more the faster you repay |
| Equipment finance | Buying a specific machine or vehicle | Fixed payments over the asset's life | Tied to that asset, not general cash |
| Invoice factoring | Other businesses owe you money | The invoice settles it | Your customer may be contacted |
The two that get confused most
A line of credit and an advance both feel like flexible cash. They behave nothing alike once the money is out.
Three questions that settle it
- Will this need come back next quarter?If yes, you want a facility you can reuse, not a lump sum.
- Can I name what the money buys?A named asset usually finances more cheaply than general cash.
- What happens to the payment in my worst month?Fixed payments do not care about your season. Collections do.
General information, not financial advice. Product features, pricing and availability vary by funder, state and business. Cashman Sam is not a bank, a lender or a broker of record, and is compensated by funding partners when a deal completes. Every application is subject to the funding partner's own underwriting.
