What is the difference between working capital and a term loan?

Length. Term loans run one to ten years; short-term working capital rarely passes eighteen months.

Pricing. A term loan accrues interest, so repaying early saves money. Much short-term funding is priced as a fixed factor, where it does not.

Underwriting. A term lender reads credit, filed accounts and collateral. A working capital funder reads bank deposits, which is a far lower bar and a much faster process.

Cost. Per dollar held, the term loan is substantially cheaper. That is the trade being made.

If you would pass a term lender's underwriting and can wait weeks rather than days, pursue the term loan. Nothing about short-term funding beats it on price.

If you have been declined, or the deadline is close, the term loan is not actually available and the real comparison is between short-term funding and doing without.

For anything paying back over years — premises, a major build-out — hold out for term financing rather than compressing it into a nine-month repayment.

Time in business and clean repayment are what move a business from short-term pricing toward term pricing. Both accrue only by trading and repaying.

SBA programmes sit at the cheap end and are worth understanding early, because the paperwork takes long enough that starting when you need the money is starting too late.

Keeping deposits in the business account and avoiding negative days does more for your eventual term-loan application than almost anything else you can control.