An overdraft facility is basically a short-term safety net tied to your business current account. It lets you withdraw more money than you have (up to a pre-approved limit) to cover temporary cash flow gaps like paying salaries, suppliers, or unexpected bills when payments are delayed. You only pay interest on what you actually use (not the full limit), and it’s flexible: draw when needed, repay as cash comes in. Perfect for fluctuating or seasonal needs, but interest rates are usually higher.

A term loan, on the other hand, is a fixed lump sum you borrow upfront for longer-term stuff like buying equipment, expanding your shop, renovating, or big inventory purchases. You repay it in regular installments (EMIs) over a set period (often 1–7 years) with predictable payments. Interest is on the full amount, but rates are often lower than overdrafts, and it’s great for planned growth or investments that generate revenue over time.

 Overdraft = quick, flexible fix for short-term cash crunches. Term loan = structured funding for bigger, longer-term goals.