Difference between Working Capital Loans and Business Lines of Credit
A business line of credit, also known as a LOC, is a business loan of small magnitude. In this, the lender, which is usually the bank, allows you to borrow money whenever the need arises. It is possible to use the LOC up until a certain specified limit. In other words, you have access to working capital. Furthermore, as you go on repaying the borrowed amount, more becomes available to you. These funds are useful when it comes to covering sudden needs, payroll, or temporary shortages.
It is better to repay money as quickly as you can because you would have to pay the corresponding interest which you could have invested productively in your business.
Working Capital Loans
These are the types of loans that allow you to utilize withdrawn money for any business purpose. For instance, working capital loans could be used to pay off unexpected expenses, helping you from lagging behind in your business.
Working capital loans are a great alternative to traditional bank loans. Besides, they are easier to qualify for and the application process is not complicated. The funds are sanctioned within a short period of time, and the repayment method varies according to the type of financing.