Line of Credit vs. Term Loan: Which Fits Seasonal Cash Flow Without Broker Calls?

Owners who need working capital do not have time for a slow bank process disguised as an online form, and they definitely do not have time for a broker who calls back three days later with one option. If your revenue swings with the season, the choice between a line of credit and a term loan is the decision that matters, and it can be made in an afternoon.

A line of credit is a limit you can draw against, repay and draw again. You pay interest only on the balance outstanding, and the line stays open, typically for a year at a time, so the same approval covers several seasons. A term loan is a single lump sum with a fixed schedule; you pay interest on the whole balance from day one whether you have spent it yet or not.

Three questions settle most cases.

• Is the need recurring? If the same gap opens every spring, a line handles it year after year without a new application.
• Is the amount uncertain? If you might need $30,000 or $80,000 depending on how the season breaks, a line lets you draw what you use.
• Is there a single purchase with a single payback? A bulk order at a discount or a piece of equipment is a term loan, even in a seasonal business.

Take an $80,000 need that lasts four months. Drawn on a line at 14% APR and repaid when the season ends, it costs about $3,700 in interest. The same $80,000 as a twelve-month term loan at 14% costs roughly $6,200, because you carry the balance for eight months you did not need it. Flip the case, and a term loan wins: if the money is tied up in equipment for three years, a line's higher variable rate and annual renewal cost more than a fixed schedule.

Choose a term loan when the amount is known, the payback period is longer than a season, or you want the discipline of a fixed payment that ends. Term loans also reach larger amounts than most lines, and their rates are fixed, which matters if you expect rates to move. Many seasonal businesses end up holding both: a line for the swing and a term loan for the thing they bought.

A good broker shops your file to the lenders that actually fit and comes back with real options, not the one product it was paid to sell. On FundLine, one fifteen-minute application is matched to the lenders whose criteria fit your revenue, season and time in business, and their offers for both lines and term loans land in the same dashboard, priced in APR so you can compare them. Lines of credit up to $250,000 now receive same-day decisions when you connect a bank account.

Write down the size of your seasonal gap, how long it lasts and whether it repeats. Those three facts tell you which product to accept. Then apply once and let the offers compete.