Working Capital Loan vs. Line of Credit: What’s the Difference?

When your business needs cash for day-to-day operations, you have a few great financing options—but two of the most common are working capital loans and lines of credit. While both provide access to funds, they serve different needs.

Let’s break down the differences to help you decide which is right for your business.

💼 Working Capital Loan

A working capital loan is a lump sum of money issued to cover short-term operational expenses—think payroll, rent, or seasonal inventory.

✅ Pros:

• One-time funding with a predictable repayment schedule

• Great for short-term needs or specific projects

• Fast approval times

❌ Cons:

• Less flexibility—you receive a set amount once

• Interest is paid on the full loan, even if you don’t use all of it

• May require weekly or daily payments

🔁 Line of Credit

A business line of credit gives you ongoing access to funds, up to a certain limit. You only pay interest on what you use, not the full credit line.

✅ Pros:

• Reusable and flexible—borrow what you need, when you need it

• Pay interest only on the amount you draw

• Ideal for managing cash flow gaps or unexpected expenses

❌ Cons:

• May come with maintenance fees or draw fees

• Can be harder to qualify for than a loan

• Lower borrowing limits compared to term loans

🧠 Which One Makes Sense for You?

Choose a working capital loan if you have a specific, short-term funding need and want a one-time cash injection with fixed terms.

Choose a line of credit if you want flexibility and ongoing access to funds for fluctuating expenses or future needs.

Need help deciding between the two?

Brilliance Funding can help you evaluate your options and match you with the right product.

👉 Book a free consultation today.