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Capital StrategiesJan 7, 2026 ·5 min read

Credit Lines vs. Term Loans: Which Is Right for Your Firm?

Both have their place in a firm's capital structure. We compare flexibility, cost, risk, and use cases to help you decide which structure fits your needs.

The Fundamental Difference

A term loan gives you a lump sum that you repay on a schedule. A credit line gives you a maximum borrowing limit that you draw from as needed and repay as settlements come in. The core question is: do you need all the capital at once, or do you need flexible access over time? The answer depends on your firm's specific situation. There's no universally right choice.

When Term Loans Win

Term loans are ideal when you have a specific, large capital need: acquiring a mass tort docket, making a major marketing investment, or hiring a team. You know how much you need, you need it now, and you want the simplicity of a single disbursement. Term loans are also generally simpler to structure and may have fewer ongoing compliance requirements than revolving facilities.

When Credit Lines Win

Credit lines excel for firms with variable, ongoing capital needs. If you're constantly funding new cases, managing irregular cash flow, and need the flexibility to draw and repay throughout the year, a credit line is more efficient. You only pay interest on what you actually borrow, which can result in significant savings compared to a term loan where you're paying interest on the full amount from day one.

The Hybrid Approach

Many sophisticated firms use both: a term loan for a specific large investment (like a mass tort docket acquisition) and a credit line for ongoing operational flexibility. This hybrid approach gives you the best of both worlds, dedicated capital for major initiatives and flexible capital for day-to-day needs.

Making Your Decision

Start by mapping out your capital needs over the next 12-24 months. If they're concentrated and predictable, lean toward a term loan. If they're variable and ongoing, lean toward a credit line. If they're both, consider the hybrid approach. Tortlink presents both options for every deal, so you can compare the total cost and structural tradeoffs side by side.

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