When is it best to opt for a line of credit?
Lines of credit are best for when you have irregular needs for cash and expect to need to draw from the LOC multiple times.

For example, if you know that your business has clients that are slow to pay and you might need a few thousand dollars here or there to cover costs while waiting for payment, an LOC can be a good choice.

LOCs are also a good choice if you have strong credit.
Is a personal loan a good choice?
Personal loans and term loans are good when you know exactly why you need cash and how much you need. For example, if you know that you need to borrow $20,000 to finance an equipment purchase for your company, a term loan can get you exactly that much money with a low, fixed interest rate.

Term loans are also better than LOCs for limiting how much you borrow because you can’t draw funds from the loan multiple times.

Do personal loans and lines of credit require a good credit score?
Yes, personal loans, lines of credit, and term loans all benefit from good credit scores. You might be able to find willing lenders if you only have fair credit, but a good credit score will help you secure the lowest costs.


Lines of credit and term loans are both valuable tools for financing your business. Lines of credit are good for irregular expenses and helping your business deal with cash flow issues while term loans are best for projects and investments with a known cost.

About the Author

TJ Porter

TJ Porter

Personal Finance Writer

I have in-depth experience in reviewing financial products such as savings accounts, credit cards, and brokerages, writing how-tos, and answering financial questions both simple and complicated.

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