Overtrading is a surprisingly common problem for growing businesses: the order book is full, revenue is rising, yet the current account is permanently under strain. It happens because growth consumes cash faster than profit generates it — and borrowing can mask the problem rather than solve it if used without a plan.
Early warning signs to watch for
- You are consistently using the full limit of any credit facility, with little or no headroom between draws.
- Debtor days are lengthening — customers are taking longer to pay, but you are still committing to new supplier costs.
- You are taking on new contracts before completing and collecting payment on existing ones.
- Profit margins are thinning as you discount to win volume, while fixed costs grow to support that volume.
- You rely on a new borrowing draw to meet payroll or a supplier payment that was supposed to be covered by trading income.
Why borrowing alone does not fix overtrading
A credit facility bridges timing gaps — it is not a substitute for working capital generated by the business itself. If your model requires permanent, maximum-utilisation borrowing to function, the underlying cashflow needs structural attention: tighter debtor terms, better invoice timing, or a review of whether growth pace is sustainable. A Credicorp Flex facility is well suited to bridging genuine timing gaps; it is less suited to funding an operation that is structurally undercapitalised.
What to do if you recognise the signs
Start with a cashflow forecast, not a profit-and-loss view. Map the next 13 weeks of expected receipts and payments in detail. If the picture shows repeated shortfalls, consider whether slower, better-margined growth is more sustainable than faster, cash-hungry growth. Your accountant or a business adviser can help you work through the numbers objectively.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: Managing repayments alongside monthly cashflow, Keeping business borrowing proportionate to revenue.