Customers can now select from various loan packages that banks and other financial institutions offer. Term loans and working capital loans are solutions designed to meet the funding needs of businesses and are a popular choice among those in need of money. I have shared the term loan vs working capital loan difference below.
Working Capital Loan vs Term Loan
Here are a few differences between working capital loans and term loans
Working Capital Loan | Term Loan |
A working capital loan is a short-term loan designed to finance a business’s daily operational needs, such as managing inventory, paying wages, or covering utility bills. | It is a type of funding provided for long-term investments, such as purchasing machinery, setting up infrastructure, or expanding operations. |
These loans are usually offered for a short tenure, typically up to 12 months, and may be renewed annually. | It is typically disbursed as a lump sum and repaid in fixed installments over a specific tenure, which could range from 1 to 15 years. |
Focus on maintaining smooth day-to-day operations | Focus on long-term growth and asset creation |
Working capital loans can be in the form of cash credit, overdraft facilities, or short-term loans, and they offer flexibility in usage and repayment. | Term loans are suited for capital expenditure that generates returns over a long period. |
I hope you found this helpful.
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What is the Difference between a Term Loan and a Working Capital Loan?
pragati
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2025-05-17T15:38:52+00:00 2025-05-17T15:38:54+00:00Comment
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