Term Loans vs. Other Loans: Find the Best Fit for Your Business Growth

Rising costs, stretched cash cycles, and the push to scale fast make borrowing almost inevitable for Indian startups and SMEs. By the end of March 2025, total MSME credit exposure reached ₹35.2 lakh crore, marking a year-on-year growth of nearly 13%. 

Borrowing isn’t the hard part anymore. The real challenge for SMEs is figuring out whether to commit to a structured term loan or turn to other loan types made for short-term, flexible needs.

Key Takeaways:

• Term loans provide structured, long-term financing, while other loan types offer flexible, short-term solutions.
• Working capital loans, cash credit, and invoice discounting help businesses manage daily operations and cash flow gaps.
• Loans can be secured or unsecured, allowing companies to match financing with assets and repayment capacity.
• Choosing the right loan type aligns funding with business goals, growth stage, and operational needs.

What is a Term Loan?

A term loan is the kind of funding where you borrow a fixed amount and agree to pay it back in regular installments over a set period. Think of it as committing to a clear repayment plan from day one.

If you're a founder, you'll often look at term loans when the need is scaling operations, opening new facilities, or investing in equipment that fuels long-term growth.

In India, you'll usually come across two types of term loans:

• Short-term loans: typically under 1 year, helpful for immediate but heavy expenses.
• Long-term loans: stretching up to 10 years, suited for large projects or capital expenditure.

Also Read: Short-Term vs Long-Term Loans: Benefits and Differences

What is a Loan in General?

A loan is money borrowed with the promise of repayment, along with interest. In business, loans can take different forms depending on the purpose and structure. Common types include:

• Working Capital Loan
• Overdraft Facility
• Bill Discounting
• Vendor Financing
• Venture Debt
• Loan Against Property

These can come in secured or unsecured forms, giving businesses the flexibility to choose based on their repayment capacity and available assets.

Also Read: Secured vs Unsecured Business Loans: A Comparative Guide

Term Loan vs Other Loan Types

While both term loans and other loan types help businesses access capital, they differ in structure, purpose, and flexibility. Here’s a side-by-side view:

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At Recur Club, we provide 15+ flexible financing solutions designed to match your business needs. Choose from customizable repayment terms and tenures that fit your cash flow and growth plans.

Ready to find the right loan for your business? Check your eligibility with our funding calculator!

When to Choose Term Loans vs Other Loan Types?

Choosing the right loan depends on your business needs, growth stage, and cash flow patterns.

• Term Loans work best when you have long-term projects or capital-intensive plans. For example, a manufacturing SME investing in new machinery or a SaaS startup expanding its product team may benefit from structured repayment and predictable costs.
• Working Capital Loans are ideal for covering day-to-day operational expenses like payroll, inventory restocking, or marketing campaigns.
• Cash Credit / Overdraft is perfect for businesses that need quick, recurring access to funds to manage temporary cash gaps or seasonal demand.
• Invoice Discounting suits companies facing delayed receivables, allowing them to secure cash quickly without taking on additional debt.

Conclusion

Picking the right loan is about matching funding to your business goals and growth stage. The choice between term loans and other types of financing can influence how smoothly your operations run and how quickly you can scale.

With Recur Club, you can compare these options side by side and access tailored debt offers that fit your business stage, sector, and growth plans. Our platform connects you to 150+ lenders, delivering funding under 72 hours with complete transparency and no hidden charges.

Partnering with Recur Club gives you:

• Dedicated Capital Experts 
• Flexible Financing Options
• Speed and Convenience 

Get started today to find the right loan type for your growth journey and focus on scaling your business with confidence.

FAQs

1. What is the main difference between a term loan and other types of business loans?

Term loans provide structured, long-term financing with fixed repayment schedules, whereas other business loans, like working capital loans, overdrafts, or invoice discounting, offer short-term, flexible funding options.

2. How do I decide between a term loan vs loan for short-term needs?

For short-term cash flow gaps, flexible options like working capital loans, cash credit, or invoice discounting are usually better. Term loans are suited for expansion, equipment purchases, or other long-term projects.

3. Can term loans and other loans be secured or unsecured?

Yes. Term loans often require collateral, but can also be unsecured. Other loan types, including working capital loans, cash credit, and invoice discounting, can be either secured or unsecured, depending on the lender and your business profile.

4. How quickly can I access funds with a term loan vs other loan types?

Term loans generally take longer due to evaluation and documentation. Short-term options like working capital loans, cash credit, or invoice discounting can provide funds in a matter of hours or days.

5. Which businesses benefit most from term loans vs other loan types?

Term loans are ideal for SMEs planning capital-intensive growth, such as new infrastructure or equipment. Flexible loans like working capital, cash credit, or invoice discounting suit businesses managing daily operations, seasonal demand, or delayed receivables.