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The difference between a business loan, credit card and overdraft

4-minute read

Loans, credit cards and overdrafts can all be good ways to support your cash flow, fund purchases or invest in business assets. However, having a good understanding of how they differ could help you decide the best type of loan for your business needs.

Key take-outs
  • A business loan is a lump sum paid into your transaction account
  • An overdraft is a pre-agreed amount you can access if your bank balance drops below zero
  • A credit card allows you to make purchases and pay for them later

Why choose a business overdraft?

An overdraft is an approved extra amount of funds (or ‘line of credit’) attached to your business transaction account, which you can access whenever you spend more than the balance in your account. You pay back what you can, when you can - as long as the overdraft stays under the approved limit. Interest is generally charged on the overdraft balance until it is fully repaid.


A business overdraft may help relieve the strain on your cash flow, by providing funds to cover expenses (such as purchasing stock and paying invoices and wages) until you get paid by your customers.


Dependent on the amount you want to ‘borrow’, you can choose between a secured business overdraft – which means you have to offer assets such as property as security – and an unsecured business overdraft, which generally has a higher interest rate.

Need cash for your business quickly?

Apply online for an unsecured business overdraft of up to $250k. You could get a response in minutes. T&Cs, fees, charges and eligibility criteria apply.

Apply now

Why choose a business loan?

A business loan is a lump sum of money leant to your business. You can choose to pay either fixed or variable interest rates, and select a frequency of repayments that works best for your finances – such as monthly, quarterly or yearly. 


The regular repayment amount is typically worked out over 1 to 30 years; and you can use different types of security – such as cash, residential property, commercial property or business assets – to ‘secure’ your loan. If you would prefer not to put up security against a loan, you could consider an unsecured business loan, though these tend to be for smaller amounts.


A business loan may be suitable for your business if you require funding for things such as a business acquisition, start-up costs, capital investment, property acquisition or development, or refinancing other lending.

Why choose a business credit card?

A business credit card gives you access to money on credit, much like a temporary loan. The amount you can access is called your credit limit. 


When you buy things with your credit card, you can either pay off the money you owe each month or carry a balance, on which we charge you interest.


Most Westpac business cards allow up to 55 days before interest is charged on the purchases you make. Please note however that interest-free periods may not apply with respect to cash advances.


A business credit card may help you even out your cash flow and handle expenses during the interest free period. Some business credit cards provide rewards points each time you spend, which you can redeem for flights, office equipment purchases and other things. Other credit cards offer lower interest rates.


With Westpac business credit cards you can order one or more additional cards for your staff (the number varies by card type), so they can make purchases on behalf of your business too.


When looking for the best type of loan for your business, you’ll need to consider the amount you want to borrow, when you feel you will be able to pay it off, and whether you are prepared to offer security. As part of your research, you may like to visit our Business Loans page.

Read more

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What's the difference between a secured and unsecured overdraft?

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Whether you’re looking to expand your business or simply need a quick cash flow boost, there are a few things to know about business lending. 

Things you should know

Westpac’s products are subject to terms, conditions, fees and charges. Any application for finance is subject to Westpac’s normal lending criteria. This information does not take your personal circumstances into account, is general in nature, and should be used as a guide only – and not relied upon. We recommend that you seek independent professional advice about your specific circumstances before choosing a business finance product.