In MikesBikes Introduction and MikesBikes Advanced firms start with existing long-term debt and have the ability to go into overdraft if necessary. What is the difference between these two external sources of capital?
Long-term debt is a loan through your bank. You arrange it ahead of time and the bank sets a rate of interest to charge.
An overdraft is an emergency borrowing facility enabled when you have an insufficient cash balance to cover expenses. For this privilege you pay a premium interest rate (compared to the interest rate of long-term debt).
So ideally you want to spend within your means each year so your overdraft is not required. However, when additional cash is required for investments in market expansion, additional factory capacity, etc, then plan ahead and use long-term debt to make use of the reduced interest rate.