At-a-glance comparison

Quick snapshot: choose an overdraft for on-demand, revolving access and a cashflow loan for a defined need you can repay in fixed instalments.

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What is a cashflow loan?

A cashflow loan is short-term working capital provided to cover a known cash shortfall — for example to pay suppliers, meet payroll or bridge a gap while awaiting customer payments. Providers include specialist short-term business lenders, non-bank lenders and brokers who place you with appropriate lenders. Typical amounts our partners arrange commonly start from around £10,000 and go up significantly depending on turnover and security.

Cashflow loans can be unsecured or secured (against business assets or via guarantees). Terms are usually fixed: you receive a lump sum and repay in agreed instalments or a single repayment at term-end. That predictability can make budgeting easier than a rolling overdraft.

Pros: predictable cost, easier to plan repayments, sometimes lower APR for defined short terms. Cons: fixed repayment schedule and potential early repayment fees depending on lender.

Image suggestion: infographic of loan flow. Alt text: “Diagram showing how a cashflow loan provides working capital to a UK business”.

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Learn more about general cashflow loan options on our partner overview of cashflow loans.

What is a business overdraft?

An overdraft is a revolving credit facility tied to your business current account that lets you run a negative balance up to an agreed limit. There are authorised overdrafts (arranged with the bank) and unauthorised overdrafts (where you go beyond your limit). Overdrafts charge interest on the amount you use and sometimes arrangement or renewal fees.

Overdrafts are typically offered by banks to customers with an existing relationship; limits vary and are often suited to smaller, frequent cash gaps rather than large one-off costs. Pricing is usually variable — daily interest or an agreed rate plus potential facility fees.

Pros: highly flexible, only pay interest on what you use. Cons: variable cost, can be expensive if used long-term and harder to forecast if rates/fees change.

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Side‑by‑side: How a cashflow loan stacks up against an overdraft

Cost & pricing

Cashflow loans: quoted as APR or fixed rate with clear instalments. Arrangement fees and early repayment charges may apply. Overdrafts: typically charged as a daily rate or variable interest plus arranged/unarranged fees and renewal charges. Over time, an overdraft used continuously can cost more than a short-term loan because interest compounds and fees recur.

Flexibility & access

Overdraft: reusable — withdraw and repay repeatedly up to your limit. Best for unpredictable or recurring small shortfalls. Cashflow loan: one-off lump sum — best where you know the amount and repayment period.

Repayment & budgeting

Loans have fixed instalments which simplify forecasts. Overdrafts are interest-only while in use (principal remains until repaid), making monthly budgeting less predictable if the drawn amount varies.

Speed & application

Arranged overdrafts can be fast if you already have the facility. New overdraft limits depend on bank underwriting and relationship. Specialist cashflow lenders and brokers often turn decisions around quickly — some short-term loans can be drawn within 24–72 hours once approved.

Impact on credit profile

Both facilities may appear on business credit files. Regularly maxed-out overdrafts can signal ongoing liquidity stress; a well-managed loan with punctual repayments can demonstrate stability. Always check whether a lender will perform a soft or hard credit search before they carry out checks.

Numeric example

Example: You need £30,000 for six months. A specialist short-term loan might charge a fixed APR equivalent to 8–18% (depending on risk) with set repayments. An overdraft charging a daily rate equal to c.10–15% APR plus fees used continuously could end up more expensive. Exact costs depend on fees, your business credit, and lender.

Not sure which price structure fits your cashflow? Get a quick quote — Free eligibility check.

Which is right for your business? Practical scenarios

• Seasonal retailer with short spikes: Overdraft is useful for variable, frequent shortfalls because you only pay for what you use.
• Construction firm funding one contract: A cashflow loan or invoice/cashflow financing to cover supplier payments for a defined period is often better value and easier to budget.
• Business with recurring small shortfalls: An overdraft may be the simplest solution if amounts are small and frequent.
• Business with weaker credit or new trading history: Specialist cashflow lenders via brokers can sometimes offer structured short-term loans when banks won’t provide an overdraft — though rates may be higher or require security.

Still unsure? Start your free enquiry and we’ll match you with lenders or brokers who fit your scenario.

Cost drivers & questions to ask lenders

Costs vary by lender and deal. Key factors that influence price:

• Loan amount and term
• Whether security or personal guarantees are required
• Business turnover and profitability
• Sector risk and payment history
• Credit history and director track record
• Arrangement, facility or early repayment fees

Questions to ask prospective lenders/brokers:

• What is the total cost (APR) including all fees?
• Are there arrangement or renewal fees?
• Is any security or personal guarantee required?
• How quickly can I draw funds once approved?
• Does this require a hard credit search and will it affect my credit score?

Use UK Business Loans to filter lenders who can answer these questions and present transparent quotes. Get matched to lenders who answer these questions — Get Quote Now.

How UK Business Loans helps

We make finding finance faster: complete a short enquiry (under 2 minutes) and we match your request to lenders and brokers experienced in business cashflow solutions. Our introducer service is free and no obligation — once matched, lenders/brokers contact you directly with quotes.

We do not lend money and do not give regulated financial advice. We connect businesses to providers who may offer cashflow loans, overdrafts, invoice finance and other working-capital solutions for amounts commonly starting from £10,000 upwards.

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Frequently asked questions

Will using UK Business Loans affect my credit score?

No — submitting an enquiry through our site does not affect your credit score. Lenders may carry out credit checks if you proceed with an application.

Which is cheaper: loan or overdraft?

It depends. For a fixed, predictable short-term need a cashflow loan is often cheaper and easier to budget for. For occasional small spikes an overdraft may be more cost-effective. Always compare the total cost (including fees).

How quickly can I get funds?

Arranged overdrafts can be immediate if already in place. Specialist cashflow loans from lenders or via brokers can sometimes be drawn within 24–72 hours after approval — timings vary by lender and documentation.

Can businesses with adverse credit apply?

Yes — some specialist lenders and brokers consider adverse credit, but rates will typically be higher and security or guarantees may be required.

Will lenders ask for security or personal guarantees?

Possibly. Security and personal guarantees reduce lender risk and can improve pricing. Always ask the lender to explain any security requirements before accepting an offer.

Is this regulated advice from UK Business Loans?

No. We are an introducer and do not provide regulated financial advice. We connect you with lenders and brokers who will provide the full terms and any regulated advice where required.

Next steps

Ready to compare quotes? Complete our short enquiry for a free eligibility check — lenders and brokers typically respond within hours during business days. Get Quote Now — Free Eligibility Check.

Sources & further reading

For background and regulatory guidance see: Financial Conduct Authority, Bank of England and GOV.UK business finance guidance.