A term loan gives you a fixed sum up front, repaid in fixed instalments over a set term. A revolving credit facility, such as an overdraft, gives you a limit you can draw from, repay and draw again as you need.
Term loans
- A lump sum, repaid in fixed monthly instalments, usually over one to seven years.
- Unsecured or secured.
- Best for one-off investments with a clear payback, such as a new contract, hiring or equipment.
Revolving credit facilities and overdrafts
- A limit you can use flexibly: draw what you need, repay, and draw again.
- You usually pay interest only on what you've drawn.
- Best for uneven cash flow, such as seasonal stock or gaps between paying suppliers and getting paid.
Using both
Many businesses use a term loan for the investment and a revolving facility for the day-to-day gaps. A common pattern is a term loan for a big order and an overdraft for the gap while you wait to be paid.
Under the Growth Guarantee Scheme
Both are available: term loans for up to 10 years, and overdrafts for up to 3 years. See What is the Growth Guarantee Scheme (GGS)?.
For more, read Seasonal stock: term loan for the order, overdraft for the gap.
Last reviewed: 8 October 2026