Chartered bank term loan vs business line of credit
A chartered bank term loan is cheaper and should be your first call if the business is bankable — two or more years of history, clean financials and strong credit. A line of credit costs more but approves on cash flow rather than balance sheet, funds in days instead of weeks, and only charges interest on what is drawn. The deciding question is not which is better; it is whether the bank will say yes inside your timeline.
Start an applicationSide by side
| Best for | Chartered bank term loan: Bankable files: strong credit, 2+ years, clean financials — Business Line of Credit: Fluctuating cash needs, payroll smoothing |
|---|---|
| Typical range | Chartered bank term loan: $50K – $5M+ — Business Line of Credit: $25K – $500K |
| Speed to funding | Chartered bank term loan: 3–10 weeks — Business Line of Credit: 3–10 days |
| Cost | Chartered bank term loan: Lowest available — Business Line of Credit: ~8–20% APR |
| Collateral | Chartered bank term loan: Secured + personal guarantee — Business Line of Credit: Often unsecured |
Choose Chartered bank term loan when
- The business has two or more years of filed financial statements
- Personal and business credit are strong and unblemished
- The need is a known, one-time amount rather than a fluctuating one
- You can wait three to ten weeks for a decision
- You are comfortable pledging security and signing a personal guarantee
Choose Business Line of Credit when
- Cash needs rise and fall — payroll, inventory, seasonal gaps
- You want to pay interest only on the balance actually drawn
- The business is under two years old or the financials are still messy
- A bank has already declined, or the timeline is days rather than weeks
- You want capital available before you need it, not after
When both make sense
Many established businesses run both: bank debt for the long-dated, asset-backed portion, and a line of credit for working capital that moves week to week.
A line of credit taken now does not preclude bank financing later. Twelve months of clean repayment history often improves the file a bank sees.
Frequently asked questions
Is a bank loan always cheaper than a line of credit?
On rate, usually yes. On total cost, not necessarily. A term loan charges interest on the full principal from day one, while a line of credit charges only on what is drawn. A business that needs $200,000 available but typically uses $60,000 can pay less in real interest on the line, even at a higher posted rate.
Should I apply to my bank first?
If the file is bankable and the timeline allows, yes — and any advisor telling you otherwise is not acting in your interest. Voxen's work starts where the bank stops: files that are partially bankable, near-bankable, or viable but not bankable on paper.
Can I be declined by a bank and still get a line of credit?
Frequently. Bank underwriting weights filed financials and credit history; alternative lines weight deposit consistency and revenue. A business with twelve months of steady deposits and a thin credit file is a decline at one and an approval at the other.
Related
- Invoice Factoring vs Merchant Cash Advance (MCA) — If the business invoices other businesses, factoring is almost always the cheaper answer — it advances money the business has already earned, priced from 1.5% per 30 days, and creates no debt.
- Term Loan vs Merchant Cash Advance (MCA) — A term loan is the cheaper instrument and the right one whenever the file can carry it — fixed payments, a defined end date, and pricing quoted as an annual rate.
- Equipment Financing vs Term Loan — If the money is going into a specific piece of equipment, finance the equipment.
- Inventory Financing vs Business Line of Credit — A line of credit is underwritten on the business as a whole and can be spent on anything; inventory financing is underwritten on the stock and is used to buy stock.
- Inventory Financing vs Merchant Cash Advance (MCA) — Both instruments put stock on the shelf without a bank loan, and the choice usually comes down to what the file supports.
- Equipment Financing vs Business Line of Credit — Buy the machine on equipment financing and keep the line of credit for working capital.
- Chartered bank term loan vs Invoice Factoring — If your file is bankable — strong credit, two-plus years of history, clean financials — the bank loan is the cheaper instrument and you should pursue it first.
- Chartered bank term loan vs Merchant Cash Advance (MCA) — These sit at opposite ends of the same spectrum.
- RBC Royal Bank business operating line vs Business Line of Credit — If RBC will approve the operating line inside your timeline, take it — the rate on a bank line is lower than anything a non-bank lender can price.
- TD Canada Trust business line of credit vs Business Line of Credit — For a business with filed statements and clean guarantor credit, a TD business line of credit is cheaper than any non-bank alternative and should be the first application.
- Scotiabank receivables-secured operating facility vs Invoice Factoring — A Scotiabank receivables facility is the cheaper way to finance invoices and the right call if your receivables fit a bank margin formula: many customers, none dominant, all under ninety days, all easy to credit-check.
- BMO Bank of Montreal equipment term loan vs Equipment Financing — If BMO will write the equipment term loan and the delivery date allows, take the bank rate — nothing else prices lower on a long-lived asset.
- CIBC business term loan vs Term Loan — A CIBC business term loan is the cheapest way to fund a defined, one-time capital need, and a bankable file should apply there first.
- National Bank of Canada receivables-secured operating facility vs Invoice Factoring — For a Quebec business with a diversified receivables book, a National Bank operating facility is cheaper than factoring and easier to run in French from end to end.
- Desjardins equipment financing through a caisse vs Equipment Financing — If you are an established Desjardins member and the caisse will finance the machine, that is the cheapest capital available and the relationship is worth protecting.
- Vancity business line of credit vs Business Line of Credit — For a British Columbia business whose work fits Vancity's mandate, a credit union line of credit is cheaper than a non-bank facility and worth the application.
- ATB Financial equipment term loan vs Equipment Financing — For an Alberta business buying new equipment, ATB is a genuinely well-matched lender and should get the first quote — provincial focus means the underwriting understands your cycle.