External financing can be a great way to help you reach your business goals, but with so many different terms, rates, and fees, it can be difficult to compare financing options. So, how much does a line of credit cost, and how does that compare to the cost of a term loan?

Term Loan Vs Line of Credit:Typical Uses

While they are both types of debt capital, lines of credit and term loans have very different uses in small business finance. For a deep dive into the differences between term loans and lines of credit, check out our article: Term Loans and Lines of Credit: What’s the Difference?

In general, lines of credit and term loans are best used for the following small business expenses:

Line of Credit

• Inventory
• Payroll
• Seasonal working capital
• Short term costs

Term Loan

• Equipment
• Real estate
• Start-up capital
• Larger costs
• Longer time needed to repay

Term Loan and Lines of Credit Cost Comparison

Interest rates

, annual fees, principal, and credit scores can make for a confusing time when it comes to comparing term loan and line of credit cost. To help you determine the best financing option for your business, we’ve broken the costs down into a side-by-side comparison.

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What is the Prime Interest Rate?

Prime or the prime interest rate

is the prevailing interest rate that traditional banks charge to customers with excellent credit scores. The prime rate is usually the same as the interest rate set by the US Federal Reserve. If your credit score could use some improvement, you will likely be charged more than prime.

Merchant Cash Advance (MCA)

Merchant Cash Advances or MCA are another common type of business financing. When a small business owner takes out a merchant cash advance, they’re given cash up front, which they repay through a predetermined percentage of their daily debit and credit card sales. This can be a great lending option for businesses with fairly stable debit and credit card sales, but it is also a common vehicle for predatory lending practices. If you are considering a Merchant Cash Advance, make sure you read and understand the terms carefully before agreeing to the loan.

Cost vs Flexibility

All three of these popular loan options have pros and cons that you need to consider before choosing a loan for your business. The chart below helps you consider the total cost of a loan verses the flexibility of it’s repayment terms (i.e. how much and how often you will make payments).

Which is Right for Your Business?

Comparing the cost of term loans and lines of credit can feel a bit like comparing an apple and an orange. If you are considering an MCA as well, the decision can get even more confusing. The best way to decide what is right for your business is to start with what your business can afford in terms of monthly or weekly payments, what the loan will be used for, and what loan terms work best for your business’s financial situation. Once you have that list, you can start comparing it to different financing options to find the best fit for your business.

Financing with Accion Opportunity Fund

If you do decide that a term loan is right for you and your business, consider working with Accion Opportunity Fund. At Accion Opportunity Fund, our goal is not only to help you get the funding and support you need to launch your business, but to help you grow and thrive once you’ve got your foot in the door. Accion Opportunity Fund is a government-regulated, non-profit financial institution with a mission to help small business owners reach their goals. Find out more about our small business loan program and apply online today.

Disclaimer: Average interest rates and typical loan terms can change rapidly, so please thoroughly check with any provider to confirm rates and terms.

Learn More About Business Financing

When it comes to your finances, you want clear guidance and easy to implement tools based on your unique needs. Visit Accion Opportunity Fund. to get started strengthening your financial management and meeting your goals.

Experience a different kind of financial education. Learn with AOF has flexible, on-demand courses developed by small business owners, for small business owners. Learn on your schedule, with no time commitment or limit. Save your progress any time to fit courses into your busy schedule.

If you’ve been disabled while serving our country, you may wonder what the next chapter has in store. After active duty, it can be tough to find a niche in civilian life – especially with a disability. But military service has given you a ton of useful skills that you can use to start your own business. And to help you do just that, there are a number of programs out there designed to help support your new venture.

Best Small Business Loans for Veterans with Disabilities

Self-Employment Grants for Service-Disabled Veterans

The Veteran Administration offers a self-employment program for service-disabled veterans. In order to be considered for this program, interested candidates are asked to prepare and submit 1) a business plan and 2) their specific funding estimates.

Based on the information provided, the VA assesses whether the service-disabled veterans qualify for Category I or Category II self-employment funding. Category I veterans are determined to have more severe disability than veterans in Category II.

This program offers a broad range of benefits for veterans, including grants which may be used for self-employment start-up costs. These grants may also be used to purchase equipment, inventory, education, additional training, and licensure frees. Note that these funds come in the form of grants, not loans – you don’t have to repay them.

In order to apply for this self-employment program, veterans may contact their local VA office. Counselors will work with interested applications to determine their qualifications and assist with the application process.

 

Government Set-Asides

The government reserves a certain portion of its private-sector contracts for small businesses and businesses owned by women, minorities, and disabled people. As a service-disabled veteran, you can qualify for these “set-asides.”

To open up that door, you’ll need to formally register your business as a veteran-owned business. For more specific details on how to register your veteran-owned business, visit VA.gov.

 

Street Shares (Online Loans)

Street Shares matches investors and small business owners interested in supporting veteran-owned businesses. Veteran-owned businesses apply for funding directly on the site and receive a response to their funding request in less than one hour.

The process involves an online application, a community bid to fund the loan, and then – if approved – funds are deposited in the business owner’s account. The loan amounts provide up to $100,000 of funding for qualified veteran applicants. The socially-influenced business model seeks to boost the number of veteran-owned U.S. companies.

For more information on applying for Street Shares funding, visit their website.

 

Venture Capital Funding (Private Funding)

The Veterans’ Opportunity Fund (VOF) seeks to invest up to $3 million in veteran-owned or managed businesses. VOF’s investment focus is on healthcare, business services, and manufacturing. In order to be considered for funding, VOF requires 1) veteran status 2) an application, and 3) a comprehensive business plan.

For more on how to apply and the resources available, visit TCP Venture Capital.

 

Hivers and Strivers (Angel Investors)

Hivers and Strivers is an investment group run by US military academy alumni. The company invests up to $1 million per veteran-owned business venture. Hivers and Strivers are looking for a return of more than ten times their initial investment, so they back veteran-owned businesses whom they believe show vast growth potential.

To complete an application or to learn more information, visit Hivers and Strivers.

 

The Bottom Line

If you’re a service-disabled veteran, you’re eligible for government-supported and private programs to help you get your small business off the ground. Currently, close to 3 million businesses are owned by veterans, nationwide. In other words, you have access to the tools, resources, and support you need to start your own business. So get out there!

Learn more about Accion Opportunity Fund’s mission and how we empower minority business owners, or explore our small business loans to see how we can help your business thrive.

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If you are transitioning from military to civilian life, you might be wondering what your next step should be. Margo Baines and Felix Macias were wondering the same thing. Margo is a Veteran of the Army National Guard and founder of Chicks with Class, a Houston-based business dedicated to empowering girls and young women. Felix is an Army Veteran and the head of Sole Sneaker Boutique, a San Antonio-based destination for premium sneakers and streetwear. If you share anything in common with them, you might find that being your own boss is a great fit for you, too.

 

1. Commitment to Service

Margo decided to join the National Guard out of a desire to make a difference. “When I was discharged, I wanted to continue to serve the society in a positive way,” she said. Margo encourages other Veterans to think about business as a way to continue their own interest in serving others. “Creating your own business gives you the same fulfillment that you felt in the military,” she explained. “When we were in the military there was that sense of pride – we’re serving our country and we’re doing this for the greater good. And when you have that passion to start your own business – whatever it may be, you will still have that pride and you’ll be serving others for the greater good.”

 

2. People Skills

Margo’s time in the military instilled a sense of humility that allowed her to appreciate the diverse challenges that people around her might be facing. She also learned how to work with people from “all different walks of life,” a skill she said has paid off in her experience as a business owner. Felix said that the values he learned through his time in service have translated to his interactions with customers. “The Army has made me what I am today,” he said. “I don’t know where I’d be if I didn’t go into the military. It made me a respectful person.”

 

3. Leadership

Veterans are more inclined than civilians to be their own boss. In fact, they are 45 percent more likely to be self-employed than non-Veterans. Felix discussed how his experience in the military prepared him for entrepreneurship. “I had my own squad, and running the business is kind of the same thing.” Margo explained how her experience in the military influenced her decision to strike out on her own. “I learned leadership skills while serving, so now it comes natural to me to take on that leadership role.”

 

4.Resilience

Entrepreneurs are risk-takers, and they often have a unique ability to persevere in the face of obstacles. Margo credits her time in the military for helping her maintain a positive attitude in the face of the unexpected. “I learned to look at failures not as failures but as successes – because it takes those failures to reach success.”

Felix advises other Veterans, whether or not they are considering going into business, to keep an open mind about their opportunities. His business journey started when his former employer considered closing the business. Felix had some creative ideas for how to make Sole Sneaker Boutique grow, so he and his fiancé Brenda, who manages the business finances, decided to buy it. “I never thought I was going to be an entrepreneur,” he said. “Stay positive! You never know what’s something’s going to turn into.”

 

5. Creativity

Starting a business means trying something you’ve never done before. That experience is bound to require problem-solving skills and creativity. For Margo, those traits come from her time in service. “In the military, I became very innovative,” she said. “Not only my life, but other people’s lives depended on me problem solving and getting things done.” Felix has found creative ways to attract new customers. Since taking over the business he has focused on building customer loyalty through social media. The company’s Instagram channel has since grown from about 3,000 to nearly 12,000 followers, and the store now has a national following. “There are people who come down from LA, Chicago – just to see the shop,” Felix said.

 

Sound like you?

If any of these characteristics sound familiar to you, it might be time to look into starting your own business. But how do you do that? For Margo, this was new territory. “I’m the only one in my family to do something like this, to start my own business from literally the ground up,” she said. Through her mentor, another Veteran who she met through the U.S. Small Business Administration, Margo learned that there are many resources available to those who are looking to start or grow a business. Here are just a few:

 

• The U.S. Small Business Administration has a wealth of resources and training available for entrepreneurs at various stages of their business journey – and they even have a resource page dedicated to Veterans.
• Small Business Development Centers provide current and aspiring entrepreneurs with free business counseling and low-cost training opportunities. Women entrepreneurs can find tailored training and assistance at their local Women’s Business Center.
• SCORE connects entrepreneurs with mentors and business advice.
• The U.S. Department of Veteran Affairs’ Veteran Entrepreneur Portal is a one-stop-shop for Veteran entrepreneurs, providing resources and training related to starting a business, accessing financing, contracting with federal agencies and more.

 

Now that you’ve decided to start or grow your business, it might be time to look for financing. Margo used her first business loan to pay for the legal fees she needed to transition from a sole proprietor to an LLC, as well as to move into her first brick-and-mortar location. Felix used his business loan to purchase inventory for his store. Here is a helpful resource on how to determine the best financing options for your own business.

November 11 is Veteran’s Day, a day set aside specially to honor the men and women who have served in the US Armed Forces.

Other than career members of the military, veterans will eventually complete their service and look for work outside the Armed Forces. Many veterans find that their US military training and expertise have given them a set of skills that can make them very successful in the business world, and lots of them are taking advantage of those benefits.

Not only have our veterans served our country, but many of them have set out to go above and beyond in the business world, too. As we reflect on their service this November 11, it’s also an appropriate time to be inspired by their success outside the military. Check out these awesome facts about veteran entrepreneurs!

 

1. Veteran entrepreneurs have unique skill sets which translate to success in business.

Military service helps veterans cultivate and hone valuable, marketable skills. Generally speaking, veterans tend to be highly-motivated, detail-oriented, collaborative, determined, able to deal with pressure, and skilled in certain technical areas. Each of these traits are highly sought after assets in today’s business and entrepreneurial climate. Veterans are also disciplined – they know how to get things done.

In particular, those skills have turned out to be useful in finance, security, and insurance. According to the SBA, 13.2% of finance and insurance businesses are owned by veterans. Many prominent CEOs attribute their success to their time in the service.

 

2. Veterans bring maturity and life perspective to the world of business.

Many veteran-owned companies are started when veterans retire from military service. According to the US Census Bureau’s Survey of Business Owners, over 75% of veteran business owners are over age 55. These second-act careers allow veterans to apply what they’ve learned during their time in the service and over their lives.

A majority of veterans retire from the military with twenty years of service before starting their own companies. They know what it means to stick with something and see it through. They’ve risen through the ranks and know how to guide less-experienced people and give them the tools for success. Rather than getting angry, they know how to move toward a solution. And they know that obstacles can and will arise and that they can and will overcome.

 

3. Veterans are more likely to start and stick with their own businesses than non-veterans.

According to the SBA, veterans were more than 45% more likely to start their own businesses than those who never served in the military, as of 2014. In addition to actively starting their own companies, veterans are demonstrating business stamina and staying power. They are able to fully commit to their businesses and weather the ups and downs of small business ownership.

According to the SBA, military veterans own as many as 2.2 million US companies. In sheer numbers, this means that approximately one in ten US businesses is veteran-owned. Vets already contribute so much to the safety and security of the US and many of them are also contributing to the security of the economy.

 

4. Veterans understand the vital importance of teamwork.

By its very definition, a successful career in the military means learning to work as a team with your service colleagues. Thoughtful, organized teamwork is crucial for military operations. You have to trust the people around you or none of you can do your jobs.

Veterans who start their own businesses already know the value of teamwork in day-to-day military life. Successful veteran entrepreneurs strive to those apply teamwork lessons to their business life. In the military, their lives may have depended on their ability to work as a team – those skills will come naturally in a business situation.

 

5. The US has a vested interested in helping veteran entrepreneurs start and succeed as business owners.

Many veterans have a hard time adjusting to civilian life after their service ends. Starting a business can really help – you have a hands-on project that requires discipline and motivation and can provide you with a purpose. It can be a healthy way to find a place in civilian life – plus it gives you financial security!

The US Veteran Entrepreneur Portal (VEP) is a virtual one-stop shop for veterans seeking information on all federal services available to help them conceive, start-up, fund, and make long term plans for their businesses. The VEP also promotes education, by connecting veterans to best practice tutorials and other pertinent up-to-date information. To begin your search now, visit the US Veteran Entrepreneur Portal site.

 

6. Veterans know how to overcome serious challenges and persevere in the face of difficult times.

Mental toughness is a mandate for those in the armed forces. The harsh reality of military service is that service members make sacrifices for our country. Active military duty means long periods of time away from friends and family, often in mentally and psychically trying conditions. It can also mean risking life, limbs, and friends. Many veterans have been injured or disabled in action. These veterans could give up, but they don’t – instead they face challenges head on and move on the next chapter.

Entrepreneurial-minded veterans haven’t let disability deter them from business ownership. Out of the more than 20 million veteran business owners in the U.S., an estimated 8.3% have a service-related disability. These disabled veteran entrepreneurs are the very definition of fortitude and perseverance.

 

7. Veterans are boosting the national economy by creating jobs and bringing in business revenue.

Veterans sacrificed themselves by serving in the US military during their active duty. Now, veteran entrepreneurs continue to serve the US by creating huge numbers of corporate jobs while boosting the economy with sales and business revenue.

According to the US Census Bureau’s Survey of Business Owners, veteran-owned businesses employ more than 6 million people. That same report showed that “veteran-owned firms had sales/receipts of $1.220 trillion, 5.793 million employees, and annual payroll of $210 billion. Employer firms were responsible for 92.3 percent of the receipts, $1.126 trillion.”

It’s clear from these numbers that veteran entrepreneurs are contributing to the fiscal health of the US economy in a significant manner. Veteran-owned businesses are a critical part of our country’s economic health.

 

8. Veterans have multiple lending options available to them so they can realize their entrepreneurial dreams.

The SBA knows that proper funding is necessary for a new businesses to succeed. Without enough capital to get off the ground, the business will fail. For that reason, the SBA offers multiple financing programs for veterans to help secure funds for their own business needs.

The SBA offers services for entrepreneurial minded veterans starting new businesses in addition to continued support for established businesses. Educational programs are coupled with lending programs so that veterans have both capital and support on how to maximize that capital. Federal contracting opportunities exist for certified Veteran-Owned Small Businesses so that they have priority access to qualifying contracts and projects.

In addition to SBA funding, microlenders offer another avenue for entrepreneurial veterans to secure financing for business start-up costs. Accion and other microlenders can help qualified veterans fund new businesses. Traditionally, microlenders are easier to qualify for than traditional bank loans, so that more entrepreneurs can start up their companies.

 

Thank You For Your Service

We all owe a debt of gratitude to the brave and selfless people that dedicate their time to the armed forces. And not only are we grateful, but we’re inspired by them both in and out of the military. They’re taking the skills and lessons they learned in the military and turning them to new and innovative ventures, building businesses and creating jobs along the way.

 

As a veteran, you’ve served your country bravely and honorably. You may be considering your next job opportunity and wondering if now is the time to start your own business. That’s an exciting new challenge! The good news is that there are many business resources specifically available to veteran-owned companies.

A recent Small Business Administration study showed that veterans with two decades or more of service were more likely to be self-employed. Moreover, the SBA 2012 Veterans Report shows veterans own more than 2.4 million U.S.-based businesses.

And why not? Applying skills learned in the military world to entrepreneurial pursuits is not a stretch. Leadership, resilience, calm under pressure, strategic thinking, maturity, discipline, dedication – these are many of the keys to success, whether in the armed forces or in the business world.

In fact, some of the rock stars of the corporate world – Lowell McAdam (Verizon), Frederick Smith (FedEx CEO), Daniel Akerson (former General Motors CEO) – sport military pedigrees. For these blue-chip leaders, it seems lessons learned in the military carried over to business acumen.

Many ex-military service men and women have found that entrepreneurship offers the chance to develop the unique, valuable skills they learned during their service. If you’re a veteran looking to delve into your own entrepreneurial venture, know that you have many places to turn for support.

Here are some of the resources that help aspiring veterans-turned-business owners with the education, funding, mentoring, and support to realize their dreams:

 

Small Business Administration (SBA)

The SBA offers a full complement of services geared toward helping veterans start businesses, as well as ongoing support once these businesses are off the ground. Their loan programs help veterans secure funding, while their educational centers are geared toward providing new business owners with support. Once your business is up and running, the federal contracting program for certified Veteran-Owned Small Businesses helps with government contract work.

 

Office of Veterans Business Development

The Office of Veterans Business Development is a segment of the SBA. This department offers free resources to veterans in need of business assistance. They focus on business plan development and contracting opportunities. Their website has a plethora of information for veterans – including their Operation Boots to Business program.

 

US Department of Veterans Affairs (VA)

The VA also offers programs to support your veteran-owned business. Furthermore, they work to stimulate veteran-owned entrepreneurial success with contracts, including Service-Disabled Veteran-Owned Small Businesses (SDVOSBs).

 

The Entrepreneurship Boot Camp for Veterans with Disabilities

The SBA partners with Syracuse University to offer its free “boot camp” training program to veterans at eight business school campuses across the U.S. The course is geared toward service-disabled men and women and focuses on small business management and financing.

The “boot camp” program is now offered at university campuses across the United States.

 

American Corporate Partners (ACP)

Transitioning from the armed services to the world of business can be a tough adjustment. ACP’s nationwide mentoring program helps veterans successfully navigate the transition to the civilian workforce. Their services include mentoring, career counseling, and networking with corporate and academic professionals.

 

Service Disabled Veterans Grants

The VA offers special consideration for service-disabled veterans in the form of self-employment grants. To qualify, you must submit a business plan for review.

After approval, the VA will determine whether you fall into Category I or Category II. Category I is for veterans who have the most severe level of service-related disability. Category II is for veterans who face challenges but have a lesser degree of disability. The amount of the grant will be based on the Category designation. This grant may be used for all business-related expenses and does not need to be repaid.

Interested veterans should meet with their local VA office to discuss these grants with a self-employment counselor.

 

Private Investors

In addition to some of these larger, public entities, there are private options like Hivers and Strivers is an angel investment group dedicated to helping your veteran-owned business get started. It is owned and managed by graduates of US military academies.

 

Microlender Financing

One of the most challenging aspects of starting a new business from the ground up is securing the necessary funding to back your dream. While there are grants and SBA programs available to veterans, you may also consider financing through a microlender. Microlenders, such as Accion Opportunity Fund, provide loans for start-up and operational business costs. These loan programs may not be available from more traditional lenders and are often easier to get than traditional bank loans.

 

Thank You For Your Service!

Now that your military service has ended, turning the skills and life lessons toward a new dream is a goal within your reach. The federal government and private entities offer many programs to support veterans, such as yourself, as you hit the entrepreneurial ground running.