If you’re researching short-term business finance options, three products come up over and over: an overdraft from your business bank, an invoice-finance facility (sometimes called factoring or invoice discounting), and a revolving credit facility like Credicorp Flex. They all promise to smooth cashflow. They all have a fast-application angle in their marketing. But each one is genuinely built for a different shape of need, and choosing the right one matters more than the headline interest rate.
What each one actually is
Business overdraft. Your business bank lets you take your account balance below £0 up to an agreed limit. Interest accrues daily on the negative balance. The overdraft is sometimes “committed” (the bank can’t withdraw it on short notice) and sometimes “on demand” (the bank can call it back whenever, with usually 30 days’ notice). Setup time is typically 2-6 weeks for a new overdraft, faster if you already have one and want to increase the limit.
Invoice finance. A finance provider advances you a percentage (typically 80-90%) of an unpaid invoice. When the customer pays the invoice, the provider takes the advance back plus a fee. There are two forms: factoring (the provider also handles collections and the customer pays them directly) and invoice discounting (you keep handling collections and the customer doesn’t know about the financing). Setup time is 4-12 weeks for a new facility because the provider audits your debtor book first.
Credicorp Flex. A revolving credit facility tied to the company (not to a specific invoice). Pre-approved limit; you draw what you need, when you need it; pay interest on the drawn balance only; pay back; redraw. Setup time is the same as a one-time business loan with us — typically same-day decision, funds in 2 hours.
Where each one fits
| If your shape is… | Best fit |
|---|---|
| Predictable monthly cashflow, want a safety net for occasional small wobbles | Business overdraft (cheapest, slowest to set up, can be withdrawn) |
| You sell on credit terms (30/60/90 days) and the cashflow gap is between invoicing and payment | Invoice finance (matches the cashflow shape exactly) |
| Your cashflow is genuinely unpredictable (seasonal, project-driven, weather-affected) and you want a same-day-decision tool you don’t have to use | Credicorp Flex (no usage commitment, fast setup, per-drawing cap) |
| You need a one-off lump sum for a specific named purchase | A one-time business loan (Credicorp Bridging Loan or similar) — not any of the three above |
Cost comparison — be honest about it
A business overdraft from a high-street bank is typically the cheapest of the three in headline interest terms (often 5-12% APR equivalent), but it’s the slowest to arrange and the easiest for the bank to withdraw at a difficult moment. Invoice finance is more flexible than a bank overdraft and faster to set up, but the fees include both an interest charge AND a service charge per invoice — easy to underestimate. Credicorp Flex’s headline daily rate is higher than a bank overdraft in % terms but the £ figures are often comparable for short-duration usage because of the 100% per-drawing cap and the interest-on-drawn-balance-only mechanism.
The right answer depends on YOUR shape, not on the cheapest headline. A bank overdraft at 8% APR that takes 4 weeks to arrange is worth less than a Flex line at higher headline rate that is available today, IF your need is today. The inverse is also true.
What we’d say if it isn’t Flex
Honesty matters. If your cashflow shape is genuinely a 60-day invoice gap, invoice finance is probably the right tool — go talk to the major UK providers (Aldermore, RBS Invoice Finance, Bibby Financial Services) before defaulting to a revolving facility. If your cashflow is predictable and your bank’s been good to you, a business overdraft is probably cheaper than us. We win the comparison when the shape is genuinely “I might need this; I might not; I want to have it ready and pay only when I use it” — which is exactly what we built Flex for.
If you’d like to talk through which shape fits your business, we’ll give you an honest steer even if the answer isn’t us. Get in touch.