Every business could use a little help and cash flow support at times which is where an overdraft facility can provide this financial safety net and help avoid unauthorised borrowing charges. Many business bank accounts offer an overdraft facility that may incur an arrangement fee but then only charges you when you use the facility. Below we have explored which providers offer an overdraft facility.
Topics
Featured: Starling Bank
Some of the features and benefits of Starling Bank’s business overdraft.
- Offers overdrafts suited to your business
- Sole trader overdraft of £250 to £10,000
- Limited company overdraft from £250 to £150,000
- Variable interest rates apply
- Rates vary based on an assessment of your business
- A set-up fee applies
- Interest is accrued daily
- Charges applied monthly
- Eligibility criteria applies
- Support team available 24/7 via phone, email or in-app chat
Starling Bank is an alternative to the high street banks and they are trying to distinguish themselves as a fairer provider with smarter ways to bank. They specialise in services to freelancers, contractors and small businesses. Their business current account customers are offered an overdraft facility by pre-agreement.
Starling Bank’s overdraft is designed to suit your business and the amount offered is based on their assessment of your business. Overdrafts range from £250 to £10,000 for sole traders and £250 to £150,000 for limited companies. Variable interest rates apply and are linked to your business type and ability to repay. Overdrafts have an eligibility criteria and set-up fees apply.
The table below gives a quick price comparison of the top UK providers for business overdrafts.
| Company | Minimum amount | Maximum amount |
|---|---|---|
| Starling Bank | £250 | £150,000 |
| HSBC | Not stated | Not stated |
| Barclays | £1,000 | £50,000 |
| NatWest | Not stated | £50,000 |
| Lloyds | £500 | Not stated |
| Santander | £500 | £25,000 |
| TSB | Not stated | Not stated |
| Metro Bank | Not stated | Not stated |
| Bank of Ireland | Not stated | Not stated |
| Bank of Scotland | Not stated | Not stated |
| Ulster Bank | Not stated | Not stated |
| Yorkshire Bank | Not stated | Not stated |
| Clydesdale Bank | Not stated | Not stated |
| Royal Bank of Scotland | Not stated | £50,000 |
| Co-operative Bank | Not stated | £250,000 |
| Cashplus | Not stated | £2,000 |
| Allied Irish Bank | Not stated | Not stated |
| Cynergy Bank | Not stated | Not stated |
| State Bank of India | Not stated | Not stated |
| Cumberland Building Society | Not stated | Not stated |
| Triodos Bank | Not stated | Not stated |
| Handelsbanken | Not stated | Not stated |
* The facts and figures included here come from each company’s website and were accurate at the time of writing but may have since changed. Also, please keep in mind these may not be apples to apples comparisons as each provider offers different solutions. This guide should be used as a starting off point for more research on your part.
Below we profile each of the companies’ services and features in a bit more detail.
Note companies are ranked in no particular order and this no way indicates one solution is better than another.
1. HSBC
Some of the features and benefits of HSBC’s business overdraft.
- Overdraft to help manage cash flow fluctuations
- Only pay interest on what you use
- Available over 1 to 12 months
- Interest calculated daily
- Arrangement fees apply
- Flexible facility
- Provides formal and informal overdrafts
- Offers faster business loan applications to those with overdrafts
- Has a text alert service to prevent you exceeding your limit
- Only available to HSBC Business Current Account customers
HSBC is an international banking provider who has a broad range of business finance products which includes bank accounts, overdrafts and credit cards. They have designed their business finance products to support businesses through a variety of situations. Their overdraft can be on a formal or informal basis.
HSBC’s business overdraft is designed to help businesses to manage their cash flow fluctuations with the comfort of having a pre-arranged overdraft which is available over 1 to 12 months and can be reviewed annually. It offers a flexible facility with interest only being charged when you are in the overdraft and it is calculated daily.
2. Barclays
Some of the features and benefits of Barclays’ business overdraft.
- Flexible overdraft facility
- Supports businesses with seasonal fluctuations and short-term cash flow issues
- Available up to £50,000
- Unsecured
- Easy to arrange
- Fast access to funds
- Only pay interest when in your overdraft
- Need to have an account with them for at least 6 months
- You can increase or decrease your overdraft
- Applications are subject to status
Barclays is a financial provider that offers a range of financial products to business customers which include overdrafts, loans, mortgages, asset finance, invoice finance and property finance. Their products are generally open to new and existing customers, but their overdrafts are only available to customers that have been with them over 6 months and run their account well.
Barclays’ overdraft offers from £1,000 to £50,000 and is usually reviewed on an annual basis but they allow you to increase and decrease your overdraft when your business needs it. The overdraft is flexible, offering fast access to funds and interest is charged only when you use the facility.
3. NatWest
Some of the features and benefits of NatWest’s business overdraft.
- Short-term finance solution
- Flexible funding
- Borrow up to £50,000
- No set repayment amounts
- Interest only charged on what you borrow
- Ideal as a safety net for expected bills
- Option to increase and decrease your overdraft
- Can be used in conjunction with their loan products
- Available only to existing customers
- Contact your Relationship Manager for more details
NatWest is a banking provider who offers business customers a range of financial products such as overdrafts, loans, credit cards, invoice finance, asset finance and international trade finance. Their overdrafts are designed as a short-term finance solution.
NatWest’s overdraft is available for values up to £50,000 and is typically available for a year but they can be renewed. It is a flexible funding solution which can be increased or decreased, and it has no set repayment amounts and it only charges interest whilst you are in the overdraft. They only offer overdraft facilities to existing account customers and it is designed to provide them with a safety net.
4. Lloyds Bank
Some of the features and benefits of Lloyds Bank’s business overdraft.
- Free set up on lower amounts
- Fees apply over £5,000
- Overdrafts from £500
- Simple pricing
- Only pay interest on the funds used
- Immediate access to funds after approved
- Has an online quoting tool
- Unauthorised borrowing charges apply
- Suitable for sole traders, partnerships and businesses
- Can apply online or over the phone
Lloyds Bank is a banking provider who offers a variety of business finance options which includes loans, overdrafts, credit credits, commercial mortgages, asset finance and invoice finance. Their overdraft facility is available to existing business account customers.
Lloyds Bank’s overdraft facility can be set up free of charge if you require an overdraft below £5,000, fees apply for facilities over £5,000. Overdraft facilities start at £500 and the maximum depends on your circumstances. It offers simple pricing and you only pay interest on the funds you use but charges will apply if you exceed the borrowing limit.
5. Santander
Some of the features and benefits of Santander’s business overdraft.
- Overdraft available to Santander business current account customers
- Available from £500 to £25,000
- Only pay interest on what you use for the days you have it
- Variable interest rates
- Annual fee applies
- Unarranged overdraft charges apply
- Must have a good credit history
- Suitable for sole traders, partnerships and limited companies
- Applicants must be a director, owner, shareholder or partner
- Business must be registered in the UK
Santander is an international banking provider that offers a variety of business finance products which includes overdrafts, loans, credit cards and asset finance. Their overdraft facility is designed for their Santander business current account customers.
Santander’s overdraft facility offers from £500 to £25,000 as arranged overdrafts which is on a variable interest rate and it occurs an annual fee. Interest is only applied to your account for the days that you are using the overdraft and for the amount you use. To be eligible you must be based in the UK and have a good credit history and the applicant must have a significant role in the business.
6. TSB
Some of the features and benefits of TSB’s business overdraft.
- Flexible overdraft facility
- Helps you to be prepared for unexpected costs
- Only pay interest on the funds you use
- Apply for the amount which suits you
- Overdraft facility fixed for the terms
- Arrangement fees apply
- Security might be required
- Suitable for sole traders, partnerships and directors
- You need a business current account
- Supportive of businesses who are experiencing difficulties
TSB is a banking provider that operates in the UK and they offer a variety of business finance products which include overdrafts, loans, credit cards and commercial mortgages. They offer a flexible overdraft facility to their business account customers.
TSB’s overdraft facility is designed to meet your needs as they allow you to apply for an amount that suits you and will help you to manage any unexpected costs. They fix the overdraft for the term and promise not to change the availability of it. They apply interest on your account for funds you use and when you use it.
7. Metro Bank
Some of the features and benefits of Metro Bank’s business overdraft.
- Business and commercial overdraft facility
- Helps business to protect their short-term cash flow
- Flexible facility
- No hidden fees
- Arrangement fees apply
- Only pay for what you borrow
- Annual reviews
- Tailored terms on commercial overdrafts
- A business bank account is required
- Can be arranged in-store
Metro Bank is a banking provider that offers a 7 day a week, 8am to 8pm store facility with no appointment needed in their stores in the south of England. They offer overdrafts, loans, credit cards, invoice finance and asset finance. They offer both business and commercial overdrafts to business bank account customers
Metro Bank’s overdraft is a flexible facility that has no hidden fees with clearly defined arrangement fees and interest charges which are only applied when you use the overdraft facility for the amount used. Commercial overdrafts have tailored interest rates and arrangement fees. You can apply in store for their overdrafts.
8. Bank of Ireland
Some of the features and benefits of Bank of Ireland’s business overdraft.
- Business and commercial overdrafts
- Relieve the pressure on your cash flow
- Only pay for what you use
- Competitive rates
- Ideal for short-term finance
- Tailored solution
- Flexible facility
- Assists seasonal fluctuations
- Annual review applies
- Requires you to have a Bank of Ireland current account
Bank of Ireland is a banking provider that operates in Ireland offering a range of business finance products to established businesses and start-ups which include loans and overdrafts. They offer both business and commercial overdrafts to businesses that hold a business current account with them.
Bank of Ireland’s overdraft is designed as a tailored solution to aid short-term finance that assists businesses in relieving the pressure on their cash flow and to manage seasonal fluctuations. The overdraft is a flexible facility that charges interest only for the amount you use. They claim to offer competitive rates and you can apply online, over the phone or in a branch.
9. Bank of Scotland
Some of the features and benefits of Bank of Scotland’s business overdraft.
- Overdrafts to help manage cash flow and working capital
- Free set up on overdrafts under £5,000
- Only pay interest on the funds you use
- Overdraft limit to suit your needs
- Simple pricing
- Immediate access to funds once approved
- Helps to avoid unauthorised borrowing charges
- Security may be required
- Variable interest rates
- Annual fees and usage fees apply
Bank of Scotland is a banking provider that is part of the Lloyds Banking Group, who offers a range of business finance products such as overdrafts, loans, credit cards, asset finance and commercial mortgages. Their overdraft facility is available to business current account customers.
Bank of Scotland’s overdraft is free to set up for limits up to £5,000 and arrangement fees apply over £5,000. Their overdraft limit is set at an amount that suits your needs and circumstances. They offer simple pricing which charges a variable interest rate on the funds you use, and charges apply on either an annual or per month basis.
10. Ulster Bank
Some of the features and benefits of Ulster Bank’s business overdraft.
- Financial support through an overdraft
- Boost your cash flow
- Terms up to 12 months
- Interest charged only on the amount you use
- Variable interest rate
- Security may be required
- Arrangement fees apply
- Interest is calculated daily
- Apply online
- Applicant must be a UK resident and be over 18
Ulster Bank is a banking provider that is based in Ireland and offers a variety of business finance products such as overdrafts, loans, credit cards and asset finance to businesses in Northern Ireland. Their overdraft facility is available to sole traders, partnerships and limited companies with their business current account.
Ulster Bank’s overdraft is tailored to your needs on terms up to 12 months on a variable interest rate. Arrangement fees apply and you may be required to provide security. They calculate interest daily and apply it quarterly on the amount you use. To be eligible you need to be a UK resident and be over 18.
11. Yorkshire Bank
Some of the features and benefits of Yorkshire Bank’s business overdraft.
- Business overdraft facility
- Helps to manage unforeseen expenses
- Simple facility
- Straight-forward charges
- Revolving credit facility
- Terms up to 12 months
- Interest charged only when you use the overdraft
- Interest calculated daily and applied monthly
- Must have a current account with them
- Personal service from a relationship manager
Yorkshire Bank is a UK banking provider that is part of CYBG Plc, and they offer a range of business finance products such as overdrafts, loans, credit cards, commercial mortgages, invoice and asset finance. Their business overdraft is available to their current account customers.
Yorkshire Bank’s overdraft facility is available on terms up to 12 months and is designed to help businesses to manage unforeseen expenses. This facility is simple to set up and offers straight-forward charges on a revolving credit facility. They charge interest daily on the amount of the overdraft used and apply the interest monthly.
12. Clydesdale Bank
Some of the features and benefits of Clydesdale Bank’s business overdraft.
- Simple business overdraft facility
- Designed to assist businesses to manage unforeseen expenses
- Terms up to 12 months
- Straight-forward interest rates and fees
- Acts as a revolving credit facility
- Only pay interest on what you use
- Interest is calculated daily and added each monthly
- Requires you to have a current account with them
- Subject to eligibility and status
- Dedicated relationship manager
Clydesdale Bank is a UK banking provider that is part of CYBG Plc. They provide a variety of business finance products which includes overdrafts, loans, credit cards, commercial mortgages, invoice and asset finance. Their business overdraft is available to their current account customers.
Clydesdale Bank’s overdraft facility has been designed as a simple facility which offers straight-forward interest rates and fees. Their overdraft is offered on terms up to 12 months on a revolving credit facility. They only charge interest on the funds you use, and interest is calculated daily and applied to your current account on a monthly basis.
13. Royal Bank of Scotland
Some of the features and benefits of Royal Bank of Scotland’s business overdraft.
- Flexible overdraft facility
- Creates a safety net for your business
- Available up to £50,000
- Terms of 12 months
- Unsecured facility
- No minimum to pay each month
- Pay interest only on the amount you borrow
- Can be renewed each year
- Available to existing business banking customers
- Designed for small to medium-sized businesses
Royal Bank of Scotland is a UK based banking provider that offers a variety of business finance products such as overdrafts, loans, credit cards and commercial mortgages. They offer their business overdraft to existing business banking customers that are small to medium-sized business with a turnover under £2 million per year.
Royal Bank of Scotland’s overdraft facility is an unsecured facility that is available up to £50,000 subject to your status on terms up to 12 months but can be renewed each year. They only charge interest when you use the facility and is designed as a safety net to protect your business from unexpected expenses.
Royal Bank of Scotland website
14. Co-operative Bank
Some of the features and benefits of Co-operative Bank’s business overdraft.
- Simple overdraft
- Short-term borrowing solution
- Available up to £250,000
- On a secured or unsecured basis
- Variable interest rate
- Arrangement fees apply
- Apply over the phone
- Requires you to have a business current account with them
- Applicant must be over 18 and a UK resident
- Offered to sole traders, partnership and limited companies
Co-operative Bank is a UK based high street bank that is designed to be an ethical banking provider. They provide a range of business finance products such as overdrafts, loans and business charge cards. Their overdraft facility is available to their business current account holders only.
Co-operative Bank’s overdraft facility overs up to £250,000 subject to your status and eligibility and is designed as a short-term borrowing solution. It can be provided on a secured or unsecured basis on a variable interest rate. You can set up the overdraft over the phone and arrangement fees will apply in most cases.
15. Cashplus
Some of the features and benefits of Cashplus’ business overdraft.
- iDraft facility
- Available as one of their credit add-ons
- Designed as extra support when needed
- Available up to £2,000
- Can be simply added to your account
- Repay when you can
- Interest charged only on the days you use it
- Daily charges apply
- Subject to eligibility
- Available to existing customers only
Cashplus is a financial provider that offers business current accounts with a range of business add-on services for these customers which are lending products such as business cash advance, overdrafts and debt protection. Their overdraft facility is called iDraft and is only available as an add-on service.
Cashplus’ iDraft is available up to £2,000 and they provide this facility to their eligible customers and they will inform you if or when you become eligible. You can add this facility to your account simply in your online servicing account. It allows businesses the security of a safety net and to repay the loan when they can.
16. Allied Irish Bank
Some of the features and benefits of Allied Irish Bank’s business overdraft.
- Offers pre-agreed overdrafts
- Available to Business Current Account holders
- Versatile and easy to use
- Helps to manage unexpected spending
- Tailor-made terms
- An assessment will be made before it is offered
- Overdrafts are repayable on demand
- Arrangement fees may apply
- Fees and charges apply
- Can apply for an overdraft over the phone or in branch
Allied Irish Bank is a banking provider that operates in Ireland and the UK providing business banking services to businesses of all sizes includes bank accounts, savings accounts and overdrafts. Their overdrafts are available to Business Current Account holders on a pre-agreed basis only.
Allied Irish Bank’s overdraft facility can be set up over the phone or in a branch, but an application is required, and they will assess your ability to repay the overdraft. Each overdraft is tailor-made to each businesses’ needs so the amounts vary and fees will depend on the amount. Arrangement fees may apply as will fees and charges and it will be repayable on demand.
17. Cynergy Bank
Some of the features and benefits of Cynergy Bank’s business overdraft.
- Offers a business overdraft facility
- Available to Business Current Account customers
- Helps to manage working capital
- Pre-agreement only
- Renew your agreement each year
- Repayable at any time
- Interest is payable on the amount outstanding
- Repayable on demand
- Fees may apply
- Can monitor your account and overdraft through online and mobile banking
Cynergy Bank is a banking provider that specialises in supporting business owners, property entrepreneurs and family businesses. They offer a range of banking services which include current accounts which can have an overdraft facility available on pre-agreement only.
Cynergy Bank’s overdraft requires an initial assessment to gauge your eligibility and each year the agreement needs to be renewed. The overdraft is designed to help you manage your working capital and day to day cashflow without having to seek out credit. The overdraft can be repaid at any time and interest is charged on the outstanding amount. The overdraft is repayable on demand.
18. State Bank of India
Some of the features and benefits of State Bank of India’s business overdraft.
- Offers a range of business loans
- Includes overdrafts
- Available to their business current account customers
- Designed as a safety net
- No further details provided
- Customers should contact their branch further information
State Bank of India is a banking services provider that operates internationally which includes the UK. They provide banking services to businesses which includes small growing business and medium-sized businesses. They offer a range of services which include current accounts, savings accounts, loans and overdrafts.
State Bank of India offers existing business current account customers the ability to add an overdraft to their account to help day to day finances and gives businesses a financial safety net. They do not provide full details of their overdraft facilities but refer customers to their branches to find out more information.
19. Cumberland Building Society
Some of the features and benefits of Cumberland Building Society’s business overdraft.
- Business overdraft facility available
- Offered to their Business Current Account customers
- Available on request
- Subject to status
- Pre-agreed overdrafts
- Unarranged overdrafts incur high-interest rates
- Charges apply for unarranged spend
- Contact them by phone or in branch for further information
Cumberland Building Society is a building society that is run for the benefit of its customers. They only offer their services to customers who reside in their operating area (Cumbria, South-West Scotland, West Northumberland and North Lancashire). They cater for all sizes of businesses and services include business current accounts, savings accounts and overdrafts.
Cumberland Building Society offers overdrafts to Business Current Account customers which are available on request. They have two sets of rates – one for pre-arranged overdrafts and the other for unarranged overdraft which also occurs an additional charge for unarranged spend per transaction. For further information, you need to contact your branch or phone them.
Cumberland Building Society website
20. Triodos Bank
Some of the features and benefits of Triodos Bank’s business overdraft.
- Provides overdraft facilities on request
- Available to their current account customers
- Eligibility criteria applies
- If you go beyond your authorised limit higher charges apply
- Online account management
- They are a bank with a social conscious
- Supports social ventures and charities that fit their ethos
Triodos Bank is a banking provider that offers an ethical service that works with like-minded organisations such as social ventures and charities that fit with their ethos. They offer a range of banking services to organisations which includes current accounts, savings accounts and overdrafts.
Triodos Bank’s overdrafts are a non-standard product that is available on request when you have a Social Venture Current Account, and eligibility criteria applies as well as an assessment. Further details are available from them. Once you have an overdraft, you can manage it through online banking. If you exceed your agreed overdraft limit higher charges and penalties will apply.
21. Handelsbanken
Some of the features and benefits of Handelsbanken’s business overdraft.
- Overdrafts are available to existing customers
- You need to be a Business Current Account holder
- It is subject to status
- An assessment will take place before an offer is made
- Speak to your account manager for details and to apply
- Caters for sole traders, limited businesses and partnerships
Handelsbanken is a banking services provider that operates internationally but is based in Sweden. They have branches across the UK and provide customers with an account manager to support them. They provide their services to sole traders, limited companies and partnerships that met their eligibility criteria. They offer business bank accounts, savings accounts and overdrafts.
Handelsbanken’s overdraft is available to Business Current Account customers but it will only be offered subject to status and an assessment will take place before an offer being made. To find out more details you should contact your account manager.
FAQ
What is a business overdraft?
It’s a business overdraft facility that essentially acts as a line of credit, creating a short-term cash flow that a business can tap into as its capital generates it. Simply put, an overdraft is a way of having access to an additional funding stream with a fixed limit but is accessible to you at will.
A business overdraft also acts as a safety net in many ways. In the best of times, money is typically not a barrier, but in more difficult times, a business can be held back simply by its account balance.
With a business overdraft, a company is not tied to its balance number, which gives businesses flexibility and options when they need them the most.
Can you get an overdraft on a business account?
You can add an overdraft to a business’s current accounts. However, it is essential to note that while fundamentally, a business overdraft operates the same way as a personal overdraft does, many additional considerations are involved with how a business overdraft works with your business bank account.
Also, business overdrafts come in two primary forms; a secured overdraft or an unsecured overdraft.
For secured business overdrafts, the business needs to provide some form of a business asset as collateral for the overdraft amount. This can be a building, land, etc. If you cannot pay off the overdraft, the bank keeps the collateral and sells off the asset to recoup the loss.
Conversely, an unsecured overdraft requires no security or collateral but will more likely come with higher interest rates to offset the risk that the lender accepts.
Is a business overdraft a personal guarantee?
No, but a bank may ask for a personal guarantee to get a business overdraft.
A business overdraft and a personal guarantee are two completely different things.
An overdraft is virtually a form of short-term cash flow that a bank or other financial institution offers a business against the company’s capital. It is essentially a line of credit that companies can use.
A personal guarantee is a form of security for payment. It is very much like collateral for a loan or any secured financial instrument, but it involves personal and business details instead of tangible property.
If payment isn’t made on the loan or overdraft, then the individual who provided the personal guarantee is responsible for paying it.
Is an overdraft better than a loan?
This genuinely boils down to the specific situation of the business.
The differences between a business loan and an overdraft are numerous, and what may benefit one company could be a negative to another.
It is essential to consider factors such as the reasons why the funds are needed and how much time is desired to repay the funds.
Some of the advantages of business overdrafts, when compared to a loan, are:
– They are especially beneficial for businesses that operate seasonally
– They can provide detailed, flexible monthly payments
– You only pay interest on the overdraft funds
– You have complete control and can stop the overdraft facility at any time
I- t can be paid back quickly without any penalty
Some disadvantages of overdrafts are:
– There is an overdraft limit
– There are additional fees, such as an arrangement fee
– Cannot shop around for the best interest rate
– Repayment terms are typically concise
– The bank can cancel it at any time
Does a business overdraft affect credit rating?
Pretty much every financial transaction and activity that a business or individual engages in could and probably will impact their credit rating.
If the overdraft is arranged, you don’t miss any payments, do not exceed the business overdraft limit, or have any other negative issues or incidents. An overdraft won’t act adversely against your credit score.
However, fail to pay it off in time and it will.
Why would a profitable business have a bank overdraft?
A business bank overdraft agreement is just one of many financial tools and resources businesses have at their disposal.
Being profitable does not necessarily mean a business has large amounts of cash lying around. For that very reason, a company that is doing very well has opportunities it can take advantage of and would miss out on them due to a lack of available funds.
An overdraft could be better than business loans or asset finance in such a case.
An overdraft facility offers the flexibility of having cash flow when things are going very well or when things aren’t so good because opportunity operates on its calendar. Therefore, businesses need to be ready at all times.