This is an agreement with your Bank where the account is allowed to go overdrawn up to a pre-arranged limit.  This limit will be agreed by the bank for a maximum period of one year and will have to be re-negotiated at the end of that time.

While an overdraft should be used to finance short term cash needs, a bank loan should be used to finance longer term business needs.These needs could include the need to move premises, the development of new markets or the purchase of fixed assets such as machinery and vehicles (also see Asset Finance).

This is commonly referred to as factoring.  It is suitable for businesses who sell to other businesses either in the UK or overseas on credit terms, ie: the business gets paid in say 30 or 60 days from the invoice date.