Comparisons

Capital On Tap vs a Business Loan or Overdraft: Which Is Cheaper?

By Afshin · 31 May 2026 · 7 min read

When cash flow is tight or you need to fund a purchase, you've got three common options: a business credit card, a business loan, or an overdraft. Each has a place — but using the wrong one can cost you hundreds in needless interest. This guide compares Capital On Tap against loans and overdrafts on cost, flexibility and credit-building, and explains when each makes sense. New cardholders get £75 with referral code 2REFY893A52.

The quick answer

A credit card like Capital On Tap is usually cheapest for everyday business spending you can repay within the statement cycle — you pay no interest and earn 1% cashback on top. A loan is better for a single large purchase repaid over years. An overdraft is the most flexible but, depending on your provider's rates and fees, can be among the most expensive per pound borrowed.

Capital On Tap card: flexible and rewarding

Capital On Tap offers credit limits up to £250,000 with no annual fee on the standard card. If you clear the balance each cycle, you effectively borrow for free — and still earn 1% unlimited cashback on every pound.

It's ideal for stock, fuel, subscriptions, supplier invoices and travel — recurring spend you can pay off as revenue comes in. Carrying a balance does incur interest, so it's best for short-term needs rather than multi-year financing.

• No annual fee, no interest if repaid in full each cycle
• 1% unlimited cashback on all spending
• Limits up to £250,000; spend instantly via virtual card
• Helps build your business credit profile

Business loans: best for big, fixed purchases

A term loan gives you a lump sum repaid over a set period at a fixed or variable rate. It's the right tool for large, one-off investments — a vehicle, equipment, premises fit-out — where you want predictable monthly repayments over years.

The trade-off is less flexibility: you pay interest from day one on the whole amount, there's an application process, and early repayment may carry fees.

Overdrafts: flexible but often pricey

An overdraft lets you dip below zero on your business current account up to an agreed limit. It's handy for short, unpredictable gaps — but interest rates and arrangement fees on business overdrafts are often higher than a credit card's, and limits are typically smaller.

For most planned spending, a credit card you clear each month beats an overdraft on cost, while also earning rewards.

Which should you choose?

Match the tool to the job: card for short-term, repayable spend (and rewards); loan for large, long-term, fixed purchases; overdraft only as a flexible safety net. Many businesses use a Capital On Tap card as their primary spending tool and keep a loan or overdraft for specific needs.