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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.
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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 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:
Barclays offer an overdraft facility which is easy to arrange and allows for flexibility if your business circumstances change.
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 |
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.”
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 |
The Lloyds Bank business overdraft offers simple pricing and options based on your turnover. Its mobile banking also scores favourably.
Santander are not currently accepting applications for business overdrafts and are instead directing existing customers to the Bounce Back Loan Scheme.
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.”
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.
Find our more about the Metro Bank business overdraft
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.
Find out more about the Starling Bank business overdraft.
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 offers a flexible overdraft facility.
Yorkshire Bank offer an unsecured overdraft facility for its business bank customers.
Clydesdale Bank offers the same business overdraft terms as Yorkshire Bank.
Royal Bank of Scotland offers the same terms as the Natwest business overdraft.
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 offers business overdrafts “made clear and simple”.
Find our more about the Co-operative Bank business overdraft.
Cashplus offers what it calls an ‘iDraft’.
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