Most small business owners are familiar with one or two funding options — usually a bank loan or a credit card. But there are several tools available, and understanding which one fits which situation can save you money and give you more flexibility.
What it is: A pre-arranged credit limit attached to your business bank account. You can draw it down as needed and repay it as cash comes in.
Best for: Short-term, recurring cash flow fluctuations where you need a buffer.
Watch out for: Overdrafts often require a credit facility application, may need security, and the interest rate on drawn balances is typically high — 10-20%+ per annum. They are also typically limited in size relative to your business revenue.
What it is: A fixed amount borrowed and repaid over a set term, with interest. Available from banks and non-bank lenders.
Best for: Long-term capital investment — equipment, fit-out, significant technology, acquisitions.
Watch out for: Long approval times, security requirements, fixed repayments that do not flex with your business performance, and cost if you repay early.
What it is: A revolving credit facility for business expenses. Useful for day-to-day purchases.
Best for: Smaller purchases, expenses with a short repayment cycle, and earning rewards on business spending.
Watch out for: High interest rates (often 20%+) if you carry a balance. Not appropriate for large funding needs.
What it is: Advances against your unpaid invoices. Instead of waiting 30-90 days for clients to pay, you access those funds within hours.
Best for: Working capital for businesses that invoice other businesses. Managing the timing gap between earning revenue and receiving it.
Watch out for: It works for B2B invoices, not B2C sales. It is not a solution for businesses with no invoices to advance against.
FundTap's version: Select individual invoices (no whole-ledger requirement), no debtor notification, connects to Xero/MYOB/QuickBooks, funds arrive within hours.
What it is: An advance against your future card sales, repaid as a percentage of daily card revenue.
Best for: Businesses with consistent card sales revenue (retail, hospitality).
Watch out for: Often very expensive in effective annual rate terms. Repayments automatically reduce with lower sales, which can extend the term significantly.
What it is: Finance secured against a specific asset — vehicle, equipment, plant.
Best for: Purchasing equipment where the asset itself provides security.
Watch out for: You are committing to an asset for the life of the finance term. Ensure the asset will remain useful and maintain value.
Match the funding type to the purpose:
Using the wrong tool for the job — for instance, a term loan to solve a working capital timing problem — creates unnecessary cost and inflexibility. Know your options, and you will make better decisions at every stage of your business growth.