General education, not advice about your specific situation — for that, talk to your accountant or a financing specialist. These are the questions we hear most before someone applies.
Both are common ways to finance a business, but they answer different questions.
A term loan gives you a lump sum up front, repaid on a fixed schedule — the right shape when you know the exact cost of what you're financing and want a predictable payment. A line of credit is revolving: you draw what you need, when you need it, and only pay interest on the balance you're carrying — better suited to expenses that recur or vary, like inventory or payroll timing.
A rough rule of thumb: if you can name the exact dollar amount and the purchase happens once, a term loan usually costs less. If the need repeats or the amount is uncertain, a line of credit avoids borrowing (and paying interest on) more than you end up using.
Underwriting varies by lender and product, but most business financing decisions weigh a similar handful of factors:
No single factor is usually disqualifying on its own — it's the combination that shapes what you're offered.
Having these ready before you apply tends to speed up review considerably:
You don't need all of this to start an application — but the more complete it is, the faster a real offer can follow.
In equipment financing, the equipment you're buying secures the loan — similar to how a car loan works. If the loan isn't repaid, the lender's recourse is generally tied to that asset rather than your business's other assets.
Because the collateral has real resale value, equipment financing often comes with more favorable terms than an unsecured product like a working capital loan, and financing can frequently cover the full purchase price, paid directly to the vendor rather than to you as cash.