Loans & Overdrafts

How do I decide whether a loan or overdraft is more appropriate?

Overdrafts are generally more appropriate to finance short-term working capital requirements. Although they are relatively simple and flexible, and interest is payable only on the amount outstanding, overdrafts are also relatively expensive and usually repayable on demand.

Term loans are usually used to fund fixed assets and core borrowing. The level of interest is usually fixed for the period of the loan. Loan terms can be tailored to the life of the asset to be purchased with the loan or to match the cash flow of the projected to be funded.

Banks, accountants and your local Business Link will be able to help you decide which is most appropriate for your business needs, or whether an alternative source of finance should be considered.