# Business overdrafts, and what to use instead.

A business overdraft was once the default way a company covered a short gap in its current account. They have become harder to arrange and slower to draw on. This guide explains what an overdraft is, why that has changed, and the alternatives a UK company can weigh up — including where a short company bridge fits.

## What a business overdraft actually is

A facility attached to a current account, not a separate loan.

A business overdraft lets a company spend below zero on its current account, up to an agreed limit. There is no lump sum paid out. The facility sits on the account, and the company uses it only when the balance drops below nothing. Interest is charged on the amount actually overdrawn, day by day, and most banks add an arrangement or renewal fee on top.

Two features made the overdraft popular. It is revolving — you draw, repay as receipts land, and draw again, all without re-applying. And it is fast at the point of use, because the limit is already in place. The cost only accrues while the account is genuinely overdrawn, which suits the kind of short, uneven gaps that working capital throws up.

Crucially, when the borrower is a UK limited company, LLP or PLC, an overdraft to that company is business credit to a body corporate. The company owes the money, not the director. That matters for the comparison below, because the same distinction runs through every alternative.

## Why they have become harder to get

The facility still exists; access to it has narrowed.

Overdrafts have not disappeared, but several things have made them less reliable as a first port of call for a smaller incorporated business:
- **Tighter appetite for unsecured limits.** Many banks now prefer to steer companies towards a structured product — a card, a loan, or invoice finance — rather than an open-ended overdraft on the current account.
- **Repayable on demand.** An overdraft is usually repayable in full whenever the bank asks. That is rarely invoked, but it makes the facility less dependable than borrowing with a fixed term.
- **Annual review and renewal.** Limits are reviewed, can be cut, and can carry a renewal fee each year. A facility you relied on last year may be smaller this year.
- **Personal guarantees.** For a smaller company, a bank may ask a director to give a personal guarantee for the overdraft — which turns a company facility into a personal exposure. We cover that in our guide to [personal guarantees](/guides/personal-guarantees-explained/).
- **Time to arrange.** Setting up or increasing a limit can take days or weeks, which does not help when the gap is this week.

None of this makes an overdraft a bad product. Where you have one, on sensible terms, it is often the cheapest way to cover a short dip. The difficulty is getting one, keeping it, and relying on it.

## The alternatives, at a glance

Each solves a slightly different problem. None is "best" in the abstract — the right one depends on the shape of the gap.

| Option | Shape | Best when |
| --- | --- | --- |
| Business overdraft | Revolving, on the current account | You already have one on good terms and the gap is brief |
| Business credit card | Revolving, with an interest-free window if cleared in full | Spread spending on cards, repaid monthly; see our [cards guide](/guides/business-credit-cards-explained/) |
| Short company bridge | Fixed sum, fixed short term | You know the amount and when you can repay it |
| Revolving facility | A limit you draw, repay and redraw | Needs recur and you want credit on tap |
| Invoice finance | Advance against unpaid invoices | You sell on credit terms and are waiting to be paid |
| Asset finance | Borrowing secured on equipment or vehicles | You are buying a specific, long-lived asset |

For a fuller map of how UK companies fund themselves — banks, the alternative-finance market, cards and overdrafts, invoice and asset finance — see the operator's overview of the [UK SME funding landscape in 2026](/articles/uk-sme-funding-landscape-2026/).

## Cards, invoice finance and asset finance

Three of the alternatives a company most often reaches for first.

### Business credit cards

A business credit card is revolving credit with a monthly cycle. If the balance is cleared in full each month, the interest-free window can make it effectively free to use for short periods. Carry a balance, and the APR applies. A card suits spread-out spending — supplier payments, fuel, subscriptions — rather than a single large drawdown. Our [guide to business credit cards](/guides/business-credit-cards-explained/) sets out the company-as-borrower distinction in full.

### Invoice finance

If your company sells to other businesses on credit terms, invoice finance advances a percentage of an unpaid invoice now, and settles up when your customer pays. It is well suited to a business whose cash is tied up in its sales ledger. It does not help if the gap is not caused by unpaid invoices — for example, buying stock ahead of a season.

### Asset finance

Asset finance borrows against a specific, long-lived asset — a vehicle, a machine, equipment. The asset itself is usually the security. It is the right tool for a capital purchase spread over the asset's life, and the wrong tool for a short-term cash gap.

## Where a short company bridge fits

For a known amount over a known, short period — when an overdraft is not available in time.

A short bridge is a fixed sum lent for a fixed, short term. It is not a substitute for a cheap overdraft, and it is not meant to be drip-fed like one. It fits a different shape of need: you know roughly how much you need, you know when money is coming in to repay it, and you need the funds before an overdraft could be arranged or renewed.

Credicorp Limited lends three short-term products to UK limited companies, LLPs and PLCs. The **Business Bridging Loan** is a single sum of £50 to £500 over 14 to 84 days, priced at 0.25% per day on the outstanding principal, with a one-time £5 establishment fee and a 100% cost cap. **Credicorp Flex** is a revolving facility — a limit of £50 to £500 you draw, repay and redraw, paying 0.25% per day on the drawn balance only — which behaves more like an overdraft. **Credicorp Slice** splits a supplier bill of £50 to £2,000 into 3 or 4 instalments over up to eight weeks for a 6% flat fee. The company is the borrower on every one, and none takes a personal guarantee.

These are small, short-term products and are not cheap relative to a bank overdraft. For most routine cash-flow needs there is a cheaper option, which is why the operator lists the alternatives it recommends you check first. See the full set in [the alternatives we recommend you check before applying](/articles/alternatives-we-recommend-you-check-first/), and the product detail on our [products page](/products/).

To weigh the cost of a short bridge against a card or overdraft on a like-for-like basis, the [flat-fee to APR converter](/calculators/flat-fee-apr-converter/) and the [bridging-loan cost calculator](/calculators/bridging-loan-cost/) both help — see also our guide to [flat fees versus APR](/guides/flat-fees-vs-apr/).

## Where to go next
- [Business credit cards explained](/guides/business-credit-cards-explained/) — revolving credit and the interest-free window
- [Flat fees versus APR](/guides/flat-fees-vs-apr/) — comparing costs like for like
- [The three Credicorp products](/products/) — Loan, Flex and Slice in detail
- [Lending and regulation](/lending-and-regulation/) — why this is body-corporate lending under Article 60B
- [Glossary](/glossary/) — plain-English definitions of the terms used here

[Open a Credicorp Flex facility at credicorp.co.uk →](https://credicorp.co.uk/business-credit-facility/)