What is Working Capital Funding?
Short-term funding for day-to-day operations: inventory, payroll, rent, utilities, and other immediate expenses. Usually repaid within 3-18 months.
What is a Term Loan?
Longer-term financing for larger investments: equipment, expansion, acquisitions. Repaid over 1-5+ years with fixed payments.
Cost Comparison
Term loans typically have lower rates due to longer terms. Working capital costs more but provides flexibility for immediate needs.
When to Use Working Capital
Use for short-term needs: covering a slow period, purchasing inventory for a big order, bridging gaps between receivables and payables.
When to Use a Term Loan
Use for investments with long-term value: equipment that will last years, real estate, major expansions that will generate returns over time.