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Corporate Loans
One drawdown or many? The answer decides the structure long before price enters the conversation.
A working-capital term loan and an overdraft can both provide liquidity, but they are designed around different patterns of use.
Product labels are not universal. Rates, fees, review rights, security and repayment mechanics vary by institution, and the written facility letter governs. Treat everything below as the shape of the question, not the terms of any specific offer.
A term facility typically provides an agreed amount as a lump sum, followed by scheduled repayments over a defined tenure.
It may fit:
The main advantage is predictability. The business knows the amount received and usually has a scheduled repayment pattern.
The limitation is that the business may begin paying for the full amount even when some of the cash is sitting unused. A longer tenure lowers each instalment while increasing the period of obligation and possibly the total cost.
An overdraft is usually a revolving limit attached to a bank account. Subject to the terms, the business can draw when the account falls below zero, repay when receipts arrive and draw again within the approved limit.
It may fit:
Its value lies in flexibility. Interest may apply to the drawn balance, but that does not make an overdraft automatically cheaper. Annual, renewal, excess, commitment or other fees may apply.
Overdrafts are commonly repayable on demand. In plain terms: the bank can ask for the outstanding balance back, or cut the limit, without waiting for a repayment date to arrive. Limits are also reviewed periodically, and a review can go either way.
A term loan gives you a schedule the bank has committed to. An overdraft usually does not. That is the real trade for the flexibility, and it matters most in exactly the conditions where you would be relying on the facility. Check the wording in your own facility letter rather than assuming.
| Question | Term-loan-shaped need | Overdraft-shaped need |
|---|---|---|
| Amount | Known and largely used at once | Variable within a maximum limit |
| Frequency | One main drawdown | Repeated draws and repayments |
| Repayment | Scheduled instalments | Balance changes with account activity, subject to terms |
| Best evidence | Quotation, project budget or defined working-capital calculation | Cash-flow history showing recurring short gaps that clear |
| Certainty | Repayment schedule is committed for the tenure | Commonly repayable on demand; limit can be reviewed or reduced |
| Main risk | Paying for excess funds or accepting an unsuitable tenure | Becoming permanently drawn, or losing the limit when you most need it |
Start from a dated forecast rather than a monthly average — the method is set out in full here: Build a rolling 13-week cash-flow forecast
For each week, record the expected drawdown, customer receipts, supplier and payroll and tax and rent payments, the projected facility balance, interest and fees, and the lowest cash position.
A one-time S$100,000 payment followed by predictable project receipts looks very different from six separate two-week gaps ranging between S$20,000 and S$60,000. The first is term-shaped. The second is not.
Compare both facilities using the same scenario. Do not compare a term-loan headline rate with an overdraft utilisation rate without including the actual drawdown pattern and all charges.
Record amount certainty, frequency of use, days outstanding, repayment pattern, rate basis, fees, review terms, security, early-repayment terms and downside results. Label the output term-shaped, revolving-shaped or diagnose first.
A revolving facility should normally move with the cash cycle it supports. If customer receipts arrive but the overdraft remains fully or increasingly drawn, the business may be funding a structural deficit.
Before requesting a higher limit, review pricing, margin, inventory, collection speed, overheads and owner withdrawals. More revolving debt can postpone the point at which the operating problem becomes visible.
A product can match the usage pattern and still be unaffordable. Test repayments or potential interest costs under slower customer collections, lower revenue and higher rates where applicable.
Protect a minimum operating reserve. Consider what happens if an overdraft is not renewed, or a term-loan repayment falls due before the expected cash arrives.
A known one-off requirement may point toward a term structure.
A repeated short gap that reliably clears may point toward revolving access.
An ongoing gap that does not clear points toward diagnosis before any additional borrowing.
This is not a product recommendation. Actual suitability depends on the business, the institution's assessment and the written facility terms.
Figures verified on 3 August 2026. Scheme parameters, rates and lender requirements change — check the primary source before relying on any figure.
Fundwise is an intermediary, not a lender. This is general information, not individual financial, legal, tax, accounting or credit advice. Financial institutions run their own eligibility and credit assessments and set all terms — we cannot guarantee approval, rate, amount or timing.
Read more about overdraft facilities, or get in touch to talk through your situation.
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