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The top 15 business overdraft providers

Every business could use a little help and cash flow support at times which is where an overdraft facility can come in handy. We’re going to look at the best overdraft options on the market for small businesses. 

What is an overdraft and do I need one?

An overdraft is a credit facility within your business bank account that extends your available balance. That means you could have zero funds in your account but as you have an overdraft you can still continue to spend up to your overdraft limit. Depending on the terms of the overdraft, you may be charged a fee or interest for using the facility. 

For consumers and businesses alike, an overdraft can provide a helpful financial safeguard at times when your spending is likely to exceed the money going into your account. It can be a more readily available and manageable form of credit than taking out a loan or business credit card. However, like all credit, you should be mindful of the repayment terms and not taking on too much debt. To avoid getting into any debt whatsoever, consider using a business expense app to carefully track your expenditure.

Let’s look at some of the main banks and building societies and their overdraft options as part of their business bank accounts. 

HSBC

HSBC are the one of the biggest banks in the world. However, their customer service score is only mid table amongst the main UK banks. Here are the terms of their business overdraft:

  • Borrow up to £30,000 
  • Get same day approval
  • Representative EAR: 9.9% 
  • Arrangement fee: 1.75% (minimum £25
  • Annual renewal fee: 1.5% (minimum £25)

Find out more about the HSBC Business Overdraft

Barclays

Barclays offer an overdraft facility which is easy to arrange and allows for flexibility if your business circumstances change. 

  • Agreed limit up to £50,000
  • Representative AER: 11.01% – 8.02% (depending on agreed limit)

Business bands

£1,000-£5,000

£5,001-£10,000

£10,001-£15,000

£15,001-£20,000

£20,001-£25,000

Representative EAR* (variable)

11.01%

10.01%

9.56%

8.02%

8.02%

Overdraft fees

From £95 up to £250

From £195 up to £295

From £225 up to £295

From 1.6% up to 2.5% of the limits

From 1.6% up to 2.5% of the limits

Find out more about the Barclays business overdraft

Natwest

Natwest’s overdraft facility also comes with a Family First event option, meaning “you could apply for added benefits to your business, to help smooth any bumps in your income during this period.”

  • Agreed credit limit up to £50,000
  • Arrangement fees and EARs vary depending on borrowing

Business bands

 £5,000

£10,000

£15,000

£20,000

£25,000

Representative EAR* (variable)

6.24%

6.24%

6.24%

5.20%

5.20%

Arrangement fee

£150

£150

£225

£300

£375

Find out more about the Natwest business overdraft

Lloyds Bank

The Lloyds Bank business overdraft offers simple pricing and options based on your turnover. Its mobile banking also scores favourably. 

  • Agreed limit up to £25,000
  • Representative EAR: 10.31% (turnover <£3m) and £7.66% (turnover >£3m)

Find out more about the Lloyds Bank business overdraft

Santander

Santander are not currently accepting applications for business overdrafts and are instead directing existing customers to the Bounce Back Loan Scheme

Find out more about Santander’s business overdraft

TSB

According to the TSB website, they are: “offering overdrafts from £50,001 up to £250,000 backed by the government Coronavirus Business Interruption Scheme (CBILS), which helps customers by providing an overdraft facility which has arrangement fees and interest paid by the government for the first 12 months.”

Find out more about the TSB business overdraft

Metro Bank

If you have a Metro Bank business account you can apply for a business overdraft up to and over £25,000. Metro Bank also scores highly for customer service and mobile banking. 

  • Representative EAR: 10%
  • Arrangement fee (up to £25,000): 1.75% or £50 (whichever is greater)
  • Arrangement fee (over 25,000): 1.25 of its limit

Find our more about the Metro Bank business overdraft

 

Starling

Challenger bank Starling offers what it terms a “fairer overdraft”. It is one of Which’s recommended banks and scores highly across the board for customer service, mobile banking and application process. 

  • Agreed credit limit up to £5,000
  • No arrangement or additional fees.
  • Manage borrowing amount via app.
  • Offer interest rates of 15%, 25% and 35% EAR (variable) depending on applicant

Find out more about the Starling Bank business overdraft.

 

Bank of Scotland

Bank of Scotland offer a business overdraft with simple pricing.

Limit

Rate

Fee

£5,000 or less

9.75% per year over the Bank of England Rate

£10 p/m usage fee

£5,001 – £25,000

9.75% per year over the Bank of England Rate

1.75% Annual Fee (min £120) 

£25,001 +

Tailored Rates

Annual Fee

Find out more about the Bank of Scotland business overdraft. 

Ulster Bank

Ulster Bank offers a flexible overdraft facility. 

  • Agreed credit limit up to £50,000
  • Representative EAR: 7.29%
  • Arrangement fee: £150 (£15,000<), £200 (£20,000<), £250 (>£20,000)

Find out more about the Ulster Bank business overdraft.

Yorkshire Bank

Yorkshire Bank offer an unsecured overdraft facility for its business bank customers.

  • Agreed limit up to £25,000
  • Representative EAR: 9%
  • Arrangement fee: 2.5% (minimum of £120)

Find out more about the Yorkshire Bank business overdraft. 

Clydesdale Bank

Clydesdale Bank offers the same business overdraft terms as Yorkshire Bank.

  • Agreed limit up to £25,000
  • Representative EAR: 9%
  • Arrangement fee: 2.5% (minimum of £120)

Find out more about Clydesdale Bank’s business overdraft. 

Royal Bank of Scotland

Royal Bank of Scotland offers the same terms as the Natwest business overdraft. 

  • Agreed credit limit up to £50,000
  • Arrangement fees and EARs vary depending on borrowing

Business bands

 £5,000

£10,000

£15,000

£20,000

£25,000

Representative EAR* (variable)

6.24%

6.24%

6.24%

5.20%

5.20%

Arrangement fee

£150

£150

£225

£300

£375

Find out more about the Royal Bank of Scotland business overdraft.

Co-operative Bank

Co-operative Bank offers business overdrafts “made clear and simple”.

  • Agreed credit limit up to £250,000
  • Offered on secured and unsecured basis
  • Representative EAR: 6.28% (variable) on amounts under £25,000
  • Arrangement fee: 1.5% (minimum £50)

Find our more about the Co-operative Bank business overdraft. 

Cashplus

Cashplus offers what it calls an ‘iDraft’.

  • Agreed limit of up to £2,000
  • £1.50 per day flat usage fee

Find out more about the Cashplus iDraft.

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