Compare finance types
Overdraft vs Trade finance: which is right for your business?
The main difference between a business overdraft and a trade finance is how they are secured and repaid: a business overdraft suits established businesses with regular deposits and short, recurring cash-flow gaps, while a trade finance suits importers, wholesalers and distributors with proven sales and reliable suppliers.
Overdraft vs Trade finance at a glance
| Business overdraft | Trade finance | |
|---|---|---|
| What it is | A business overdraft is an approved limit attached to your business transaction account that lets the balance go below zero up to that limit, with interest charged only on the negative balance. It is designed to absorb short timing gaps, not to fund long-term purchases. | Trade finance is a revolving facility that pays your suppliers for goods at the time of order and gives your business 60–180 days to repay, bridging the gap between paying for stock and being paid for it. It covers both imported and domestic purchases. |
| Amount | $10,000 – $500,000 | $50,000 – $5,000,000 |
| Term | 12–12 months | 2–6 months |
| Indicative rate | 8.5% – 19.5% p.a. | 9% – 20% p.a. |
| Rate type | Variable | Variable |
| Security | Unsecured (guarantee may apply) | Secured by receivables |
| Repayments | No set repayment — deposits reduce the overdrawn balance | Each drawdown repaid in full at the end of its term |
| Typical speed | 3–10 business days depending on security | 1–3 weeks to establish, then 24–48 hours per drawdown |
| Best for | Established businesses with regular deposits and short, recurring cash-flow gaps | Importers, wholesalers and distributors with proven sales and reliable suppliers |
| Consider the other if | Funding an asset purchase or any expense you will repay over years | Service businesses with no stock, or one-off purchases that do not justify a facility |
| Tax | Interest and line fees on business-purpose overdrafts are generally deductible. Confirm with your accountant. | Interest and facility fees on trade borrowing are generally deductible. Confirm with your accountant. |
Rates shown are indicative ranges observed across our lender panel for the period stated. They are not an offer or quote. Your rate depends on your business, the lender, the amount, the term and the security offered. The lender makes the final credit decision.
When to choose a business overdraft
A business overdraft is usually the better fit for established businesses with regular deposits and short, recurring cash-flow gaps. Its main advantages are interest only on the days you are overdrawn, no drawdown request — it works through your existing account, automatically repays as customers pay you. Consider the alternative if funding an asset purchase or any expense you will repay over years.
When to choose a trade finance
A trade finance is usually the better fit for importers, wholesalers and distributors with proven sales and reliable suppliers. Its main advantages are pay suppliers upfront and often negotiate better pricing, revolving limit recycles with each repayment, works alongside invoice finance to cover the full cycle. Consider the alternative if service businesses with no stock, or one-off purchases that do not justify a facility.
Business overdraft
A business overdraft is an approved limit attached to your business transaction account that lets the balance go below zero up to that limit, with interest charged only on the negative balance. It is designed to absorb short timing gaps, not to fund long-term purchases.
Trade finance
Trade finance is a revolving facility that pays your suppliers for goods at the time of order and gives your business 60–180 days to repay, bridging the gap between paying for stock and being paid for it. It covers both imported and domestic purchases.