Working capital loans are short-term products designed for financing day-to-day business needs, typically with repayment terms of three years or less.
Working capital loans can be structured in a variety of ways—as short-term loans, lines of credit, invoice financing, merchant cash advances, etc.
Term loans, on the other hand, have a single structure. With business term loans, you receive a lump sum of capital that you repay, with interest, over a set period of time.
Additionally, term loans fall into one of three categories:
Short-term loans: Repayment period of one year or less
Medium-term loans: Repayment period of one to five years
Long-term loans: Repayment period longer than five years
Moreover, whereas working capital loans have a specific use case—day-to-day operational needs—term loans are much more flexible.
These products can be used for a variety of purposes, including everything from buying equipment to financing a business renovation.