Overdrafts, loans and credit cards are where most businesses start. When sales rise quickly, it helps to know which options grow with you and which stay the same size.

By John Day, Sales Director at Apollo Business Finance

Say you win a new customer worth £20,000 a month. The work starts straight away. Your staff and suppliers still need paying this month, and the first payment from the new customer might not arrive for 60 days.

The more you sell, the more you spend before you get paid. Many owners only notice the gap once it has already opened.

UK Finance’s Business Finance Review for the second quarter of 2026 found that small and medium-sized businesses were using 51.4% of their agreed overdraft limits, the highest level since March 2020. In the same quarter, gross lending to SMEs reached £5.35bn, a post-pandemic high.

Most businesses start with the same few types of funding. Here is how each one copes when sales start to climb.

The usual starting points

Overdraft. An overdraft lets you dip below zero in your business account up to an agreed limit, and you pay interest only on what you use. It’s handy for evening out the odd tight month. The limit is set in advance and usually reviewed once a year, so it won’t rise on its own as your sales do, and it can be reduced or withdrawn at short notice.

Business loan. A loan gives you a lump sum that you repay in regular instalments over an agreed term. It suits one-off costs with a clear return, such as new equipment or bigger premises. Repayments stay the same whether you have a busy month or a quiet one. Lenders often ask for security, meaning an asset they can claim if the loan isn’t repaid, or a personal guarantee, which is a promise to repay from your own money if the business can’t.

Business credit card. A credit card is useful for smaller, everyday purchases, and you usually won’t pay interest on them if you clear the balance in full each month. Some business cards also make directors personally responsible for what’s owed, so check the terms.

Each of these comes with a fixed limit or a fixed amount, agreed before you know how much your sales will grow.

Funding against your unpaid invoices

If you sell to other businesses and give them time to pay, a finance company can advance most of the value of your invoices, often 80% to 90%, soon after you raise them. You receive the rest, minus fees, when your customer pays. This is called invoice finance. With factoring, the finance company also collects payment from your customers, and with invoice discounting you carry on collecting it yourself. Some providers will fund just one or two customers’ invoices instead of all of them.

Because it’s based on what you’ve invoiced, the amount available grows with your sales. It usually costs a service fee plus a charge on the money you draw, and it only works if you sell to other businesses on credit.

Funding against what your business owns

Some lenders will look at your stock and equipment as well as your invoices, and lend against all of them together. This is usually called asset-based lending. It tends to suit businesses that hold a lot of stock or machinery, such as manufacturers and wholesalers. As the value of what you own goes up, so can the amount you borrow.

Funding repaid from your takings

If most of your income comes in through card payments or regular subscriptions, some providers will lend you a lump sum and take repayments as a share of your future takings. You’ll see this called a merchant cash advance or revenue-based finance. In a quiet month you repay less, and in a busy month you repay more. It can be quick to arrange, but add up the total you’ll pay back before you sign, as it can cost more than other options.

Questions to ask before you sign

Whichever type you look at, ask every provider the same questions so you can compare them fairly.

• What will it cost in total? Ask for every fee, including any minimum charges, as well as the headline rate.
• How long am I tied in? Check the minimum term, the notice period and any fees for leaving early.
• What happens if things go wrong? Ask what the provider can claim if you can’t repay. With invoice finance, also ask whether you have to repay the money if a customer never pays.
• What am I signing personally? Many providers ask directors for a personal guarantee or a similar promise.
• How soon can it start? If the new work starts next month, you’ll want the funding in place by then.

Know your options before you need them

Many businesses use more than one of these at once. A loan might pay for new premises while an overdraft covers the odd slow month.

Before your next big order arrives, work out how many days you usually wait to be paid and how much you’d need to spend upfront if sales rose by a fifth. Take those two numbers to your accountant or an independent commercial finance broker, and you’ll quickly see which options fit.

About the author. John Day is Sales Director at Apollo Business Finance, which provides invoice finance to small businesses across England and Wales. www.apollofinance.biz