An overdraft isn't always the right answer. Here's an honest comparison of every working capital option available to Australian SMEs - so you can choose what actually fits your business.
Check your eligibility →| Product | How it works | Best for | Typical cost |
|---|---|---|---|
| Business Overdraft | Revolving facility - draw and repay repeatedly | Ongoing cash flow management | 14–25% p.a. on drawn balance + line fee |
| Business Loan | Lump sum, fixed repayments | One-off purchases, known expenses | 12–25% p.a. on full amount |
| Line of Credit | Same as overdraft - revolving | Ongoing working capital | 14–25% p.a. on drawn balance |
| Invoice Finance | Advance against unpaid invoices | B2B businesses with 30-90 day terms | 1–3% of invoice value per month |
| Business Credit Card | Revolving credit on a card | Small, frequent purchases | 15–22% p.a. if not paid in full |
| Revenue-Based Finance | Fixed fee loan repaid as % of revenue | Businesses with high revenue, thin margins | Factor rate 1.1–1.5x |
| Trade Finance | Funds released to pay suppliers directly | Importers, wholesalers | Varies by arrangement |
A business overdraft is ideal when your cash flow need is recurring and unpredictable. If you regularly need to bridge gaps between spending and receiving payments - wages before invoices are paid, stock before a busy period, rent before a seasonal upswing - an overdraft gives you a permanent safety net.
The key advantage is flexibility: you only pay for what you use, and the facility resets itself every time you repay. No reapplication, no new paperwork.
Yes - and many businesses do. A common setup is a business overdraft for general working capital (wages, rent, day-to-day) plus a term loan for a specific investment (equipment, fitout, expansion). OverdraftMe can arrange both through a single application process.
Not sure which product fits? Tell us about your business and we'll recommend the right structure - whether that's an overdraft, a loan, or a combination. Free, no obligation.
A business overdraft is ideal for ongoing, revolving cash flow needs. But it's not always the best option. Here's when you should consider alternatives:
A business term loan gives you a lump sum with fixed repayments over 6-24 months. Unlike an overdraft, the repayment schedule is locked in from day one - you know exactly what you owe each week or fortnight.
Best for: Equipment purchases, vehicle finance, business acquisitions, fitouts, or any one-off expense with a defined cost. Also useful when you want repayment certainty for budgeting.
Rates: 12-22% p.a. unsecured through non-bank lenders. Often slightly lower than overdraft rates because the lender has certainty of repayment timing.
Disadvantage: Not revolving. Once you've borrowed and repaid, you need to reapply for more. Not suitable for ongoing cash flow management.
Invoice finance (also called invoice factoring or debtor finance) advances you 70-85% of your outstanding invoices immediately, rather than waiting 30-90 days for clients to pay. When the client pays, the financier releases the remainder minus their fee.
Best for: B2B businesses with large outstanding invoices and long payment terms. Common in construction, recruitment, manufacturing, and professional services.
Cost: Typically 1-3% per invoice as a factor fee, plus a service fee. This can be cheaper or more expensive than an overdraft depending on your invoice volume and payment terms.
Disadvantage: Your clients may need to be notified (depending on the arrangement). Only works for B2B invoices, not retail/consumer businesses. More complex to set up than an overdraft.
A business credit card gives you a revolving credit limit (typically $5K-$50K) that you can use for purchases and cash advances.
Advantages: Convenient for small purchases, earns rewards points, widely accepted.
Disadvantages: High interest rates (18-22%). Merchant surcharges of 1.5-2% on Amex, which costs your business thousands per year. Low limits compared to overdrafts. Not suitable for large cash flow needs.
For most businesses doing more than $5,000/month in supplier payments, replacing credit cards with an overdraft saves significant money in surcharges alone. Full credit card vs overdraft comparison.
Equipment finance is a secured loan specifically for purchasing business equipment - vehicles, machinery, tools, technology. The equipment itself serves as security, which means lower rates than unsecured products.
Best for: Any business buying physical equipment. Rates from 5.5-12% p.a. because the asset secures the loan.
Disadvantage: Can only be used for equipment purchases, not working capital. If you need cash flow funding, an overdraft is more flexible.
A merchant cash advance provides a lump sum in exchange for a percentage of your future card (EFTPOS) sales. Repayments are taken automatically as a fixed percentage of each day's card revenue.
Best for: Retail and hospitality businesses with consistent daily card sales. Repayments flex with your revenue - busy days pay more, quiet days pay less.
Disadvantage: Expensive. Factor rates of 1.1-1.5 mean you repay 10-50% more than you borrow. Not suitable for businesses without significant card revenue.
If your cash flow issue is specifically an ATO debt, you can negotiate a payment plan directly with the ATO. However, be aware that ATO General Interest Charge is 10.96% p.a. and is NOT tax deductible since 1 July 2025. A business overdraft at 18% with tax-deductible interest can actually cost less. Full comparison here.
If you own property and can wait 4-6 weeks for approval, a secured bank overdraft will give you the lowest rates (6-12% p.a.). The CBA, NAB, ANZ, and Westpac all offer secured business overdraft facilities.
Requirements: 2+ years trading, full financial statements, tax returns, property valuation, credit score 600+. Approval takes 4-8 weeks.
Best for: Established businesses with property who prioritise rate over speed.
If you're not sure which product fits your situation, contact us. OverdraftMe specialises in business overdrafts and lines of credit but we'll tell you honestly if a different product is better suited. We'd rather point you in the right direction than fit a square peg into a round hole.
Check your eligibility or call 02 8046 3933 to talk to John Pierre Saliba directly.
2 minutes. No credit impact. No commitment.
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