Line of credit or term loan? Match the instrument to the gap

The right product follows from one question: is this a timing problem or an investment?

Businesses borrow for two structurally different reasons, and most bad financing decisions come from confusing them.

A timing problem is a gap between when you pay and when you get paid. It's recurring, self-liquidating, and unpredictable in size. Revolving credit fits it: you draw when the gap opens, repay when the receivable lands, and pay interest only for the days you were short.

An investment is a one-time deployment with a return profile — a second location, a piece of equipment, an acquisition. It's known in size and produces cash over years. Term debt fits it, with the amortization matched roughly to the payback period.

Funding an investment with a revolving line usually means you never pay it down, so the line stops being available for its real job. Funding a timing gap with a term loan means you carry principal you don't currently need and pay for it every month.

The practical answer for most growing businesses is both: a line sized to one to two months of operating expense, plus term debt reserved for things that produce a return you can point to.