Before you choose the right source of capital for your business, it is imperative that you know the difference between term loan and working capital loan adeptly.
Working Capital Loans:
• Working capital loans are primarily short-term business loans, and hence the repayment period for them is as low as 4 months.
• The amount of the loan is based on the cost of running the business, since such loans are customized in accordance with the regular expenses incurred to run a business.
• Such loans can be availed as many times a business might require, since the only criterion that might affect its sanction is timely repayment.
Business Term Loans:
• Repayment Tenor: 1-5 years.
• Meant to cover investments that require a high cost. E.g.: business expansion, purchase of expensive plant and machinery, etc.
Another major difference between term loan and working capital loan is that while the former is secured, the latter is unsecured.
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