Loan or credit line: a decision guide

Step 1 — Is the need one-off or recurring?

Start here, because it settles most cases. A single, defined need — a piece of equipment, a marketing push, a one-time tax bill — points to a term loan: known sum, known cost, known end date. A need that recurs unpredictably — seasonal swings, lumpy customer payments, the odd gap here and there — points to a revolving credit line you can draw and repay as required. See term loan vs revolving facility for the structural detail.

Step 2 — Will the money sit idle?

If you would draw the full amount and use it steadily, a loan is efficient — you are paying for money you are using. If you would draw only in bursts and sit cash-rich the rest of the time, a line is cheaper, because you pay interest only on what is out. Idle borrowed money on a term loan is dead cost; a line avoids it.

Step 3 — How much certainty do you need?

A loan gives a fixed schedule and a fixed total cost — ideal for budgeting a project. A line gives flexibility but a cost that depends on usage. If you are funding something you will plan and account for precisely, the loan's certainty helps. If you are managing an unpredictable cash rhythm, the line's flexibility is the point. Model both in pounds with the loan comparison calculator.

Step 4 — Could you use both?

Often the answer is 'both'. A term loan for the defined project, a line for the day-to-day wobble, is a common and effective split. Credicorp offers a fixed-term business loan and a Credicorp Flex revolving line — both lent to the company with no personal guarantee — so you can match each need to the right tool. Register to apply. Educational content, not financial advice.