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Business Loan vs. Line of Credit: What’s Right for Me?

A person talking to a business loan agent in NYC

Business loans and lines of credit are two financial products commonly used by small businesses. Either of these could be a good option for you depending on several factors, such as your financial needs, the deals you’re getting from lenders, and how you want to repay.

If finance is not your expertise, it may be difficult to tell if your business needs a loan, a line of credit, or even a cash advance. This is why we at Whitestone Fund work with you to understand your financial state and refer you to lenders offering the best loan packages in NYC for your specific business needs.

Let’s consider business loans and lines of credit one at a time to help you decide which is better.

Considering Business Loans

Business loans are financial products where you get a lump sum amount of capital from a lender and repay it over a term with some interest. Business loans are a good way to secure capital to make costly improvements to your business, such as recruiting a new team or increasing your inventory size.

Whatever you do with your business loan, it must increase your profits so that you can make payments during the upcoming term. Once the term ends, you can take out another loan to make other major improvements in your business.

Pros of Business Loans:

  • Business loans allow you to borrow more than lines of credit.
  • Business loans tend to have lower interest rates and cost of capital than lines of credit.

Cons of Business Loans:

  • Business loans are only available for businesses older than at least six months.
  • Business loans require a credit score of at least 500.

Visit our FAQ page to see if you qualify for a business loan.

Considering Line of Credit

A business line of credit is a short-term loan that businesses can use on an as-needed basis. You can borrow any amount of money up to a certain pre-set limit to run your operations. You’ll only pay interest on the amount you borrowed, not the entire limit.

A line of credit is useful when you’re unsure how much money you need. For example, you can use it when you have a low cash flow after settling payable amounts but waiting to collect your receivable amounts.

Pros of Line of Credit:

  • Businesses can borrow only the amount they need.
  • A line of credit gives more flexibility to businesses without a comprehensive plan.

Cons of Line of Credit:

  • Keeping a cash cushion is less costly than a line of credit.
  • Limits of lines of credit tend to be much smaller than business loans.

Apply For Cash Advances and Loans in NYC with Whitestone Fund

Whitestone Fund is a leading provider of loan services in NYC, connecting businesses to lenders for cash advances and business loans at reasonable rates. Click here to apply for an NYC business loan agent referral now!

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