Working Capital
Working Capital vs Term Loan
Two instruments, two very different effects on your monthly cash position. How to tell which one your requirement needs.
21 January 2026 · 5 min read
A term loan gives a fixed amount repaid over a defined tenure. A working-capital limit is a revolving facility you draw on as the operating cycle demands and repay as collections arrive.
A simple test
If the money buys something that will serve the business for years, it usually belongs in a term structure. If it funds the gap between paying and getting paid, it usually belongs in a working-capital structure.
Why the mismatch hurts
Recurring operating needs funded by term loans create fixed instalments that ignore seasonality. Long-lived assets funded from a working-capital limit consume the headroom the business needs to trade.
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