Business overdrafts

Last updated on 10 August 2023

Whether you’re just starting out in the business world, or are an experienced entrepreneur looking for a new overdraft facility, understanding how UK business overdrafts work is essential. There are lots of considerations to make when choosing the right solution for your company’s needs and it can be tricky to get the information that you need. To help, this guide will explain the basics about UK business overdrafts.

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Best business overdrafts UK

BankLowest monthly feeOffers current account?Offers savings account?

Allied Irish Bank

£2.50YesYes

Bank of Scotland

FreeYesYes

Clydesdale Bank

£6.50YesYes

Co-operative Bank

£7YesYes

Cumberland Building Society

FreeYesYes

Cynergy Bank

£5YesYes

Danske Bank UK

£9YesYes

HSBC

£6.50YesYes

Kinetic

£6.50YesYes

Lloyds Bank

FreeYesYes

Metro Bank

£6YesYes

NatWest

FreeYesYes

Royal Bank of Scotland

FreeYesYes

Santander

£7.50YesYes

State Bank of India (UK)

£25YesYes

Triodos Bank

FreeYesYes

TSB

£5YesYes

Ulster Bank

£2.67YesYes

Yorkshire Bank

£5YesYes
Top 19 business overdraft accounts

What is a business overdraft?

A business overdraft is an arrangement with a bank that allows a business to borrow money up to a certain limit. This can be a useful way to manage cash flow and deal with unexpected costs. Interest is charged on the amount borrowed, and the business will need to repay the debt plus interest and any other fees.

Why would a business use an overdraft?

An overdraft can be a useful tool for businesses that need to manage cash flow and access short-term finance quickly. It can also help businesses deal with unexpected costs, or take advantage of business opportunities.

What features make a good business overdraft?

When choosing a business overdraft, it’s important to look for features that fit your business needs. Some features to consider include interest rates, fees, repayment terms, and access to credit limit increases. It’s also important to read the fine print; make sure you understand the full details of the overdraft agreement before signing up.

Which UK banks offer the best business overdrafts?

The best business overdrafts will depend on your individual circumstances, but some of the top UK banks offering business overdrafts include HSBC, Lloyds Bank, Barclays, NatWest and Santander. Each bank offers different features, so it’s important to compare the options and find one that suits your business needs.

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What fees are usually payable on a business overdraft?

As well as the interest payable, business overdrafts typically come with fees for transactions, such as deposits and withdrawals. There may also be a set-up fee as well as other account maintenance fees. It’s important to factor in the cost of these fees when calculating the total cost of your overdraft.

It’s important to remember that an overdraft is a form of short-term borrowing, so you should make sure that you’re able to repay the debt in full and on time. Make sure you review your business overdraft regularly and use it wisely to ensure you get the most out of it.

Secured and unsecured business overdrafts

Overdrafts can be secured against property or other assets, or unsecured. Unsecured business overdrafts are usually offered for smaller amounts and come with higher interest rates than secured options. Businesses should always shop around to compare different offers from banks before deciding on an overdraft facility.

How does a business overdraft work?

A business overdraft works by allowing a business to borrow money up to a pre-agreed limit, which is known as the credit limit. You can withdraw money from your account up to the credit limit and repay it back in instalments plus interest and any other fees. Businesses will need to arrange an overdraft with their bank before they can use it.

How to get a business overdraft

Getting a business overdraft typically involves filling out an application form with your bank and providing proof of your business’s financial position. Banks will then assess the application to decide whether they can offer you an overdraft and at what terms. Depending on the size of the overdraft, banks may also ask for security in order to reduce their risk.

FAQ

How much business overdraft can I get?

The amount of overdraft you can get depends on your business’s income and ability to repay the debt. Banks will usually offer larger overdrafts if they are secured against assets, such as property or other investments.

How much does a business overdraft cost?

The cost of an overdraft will depend on the interest rate and fees charged by your bank. Most banks will charge a flat fee for using the overdraft, as well as a variable interest rate that is applied to the outstanding balance.

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