Business overdrafts have long been the default tool for covering short-term cashflow gaps, but they have a weakness: they are usually repayable on demand. A bank can reduce or remove an overdraft with limited notice, often at the very moment your business is leaning on it. That uncertainty makes planning hard.
The problem with relying on an overdraft
An overdraft that can be pulled at short notice is not a foundation you can build on. Many companies discover the limit is smaller, more expensive or more conditional than they assumed, precisely when a gap appears. A facility with clear, agreed terms removes that ambiguity.
How a structured facility compares
- Defined terms set out in your offer, rather than discretion that can change.
- A clear repayment path you can plan your trading around.
- Funding sized to a specific cashflow need rather than a fluctuating limit.
Use the right tool for the job
For genuinely day-to-day, unpredictable swings, an overdraft still has its place. But for a defined cashflow gap, a facility with an agreed rate and term can be steadier. You repay over your agreed term at the rate shown in your offer, with no surprises about whether the funding will still be there next week.
Credicorp lends only to UK limited companies and LLPs for business purposes. We do not lend to individuals or sole traders and take no personal guarantees from directors. As an exempt lender we are outside the FCA consumer-credit regime, so the Financial Ombudsman Service and FSCS do not apply.
See also: Can business finance help bridge a short-term cashflow gap?, How do I manage a seasonal dip in trading? and Using finance to cover payroll during a cashflow gap.