What is the difference between an overdraft, a business loan and invoice finance?

An overdraft can help cover short gaps between payments and receipts, but its limit and continued availability depend on the lender’s terms. A loan is often easier to plan around because the amount, term and repayment schedule are agreed upfront. It may suit a defined investment better than a continually increasing overdraft. Invoice finance links funding to eligible customer invoices and can help where sales are healthy but collections are slow. Different facilities leave you or the provider responsible for collection. It will not necessarily fund disputed invoices or every customer. Start with the purpose and timing of the cash gap, rather than choosing whichever product appears easiest to obtain.

Look beyond the advertised interest rate. Arrangement fees, service charges, minimum terms, early repayment conditions and security can materially change the cost. Ask whether a personal guarantee is required and how much borrowing would remain available if trading weakens. Build repayments into a cash forecast using realistic collection dates, including a slower-sales scenario. If the business is borrowing to fund ongoing losses, the facility alone will not resolve the underlying problem. CASS can help you assess the amount needed, the repayment capacity and the information a lender will want. That gives you a clearer basis for comparing options and taking specialist funding advice where the terms need closer review.