Business Overdraft Cost Calculator

UK business overdraft rates typically range from 5% to 15% APR, depending on the bank, business size, and creditworthiness. Unauthorised overdraft rates can be 30%+ APR.

An overdraft is flexible and good for short-term cash flow gaps. However, it should not be used as permanent funding — overdrafts are repayable on demand and more expensive than term loans for sustained borrowing.

Typically: 6-24 months of bank statements, management accounts or recent filed accounts, cash flow forecast, and details of existing borrowing. Many banks now offer instant decision for existing business account holders.

Traditional bank overdrafts require a good credit profile. Alternative lenders and challenger banks (Starling, Monzo Business, Tide) have more flexible criteria, often using real-time transaction data rather than credit history.

An arranged overdraft is pre-agreed with the bank. An unarranged overdraft occurs when you exceed your balance without agreement — banks charge significantly higher rates (often 30%+ APR) and may charge additional fees.

Yes. Business overdraft interest is an allowable expense for corporation tax and income tax purposes, as long as the overdraft is for business purposes.

Overdraft limits vary widely based on turnover, profitability, and banking relationship. Small businesses might access £5,000-£50,000 as an overdraft. Larger businesses may get £100,000+.

Yes, a business overdraft can cover payroll shortfalls. However, using an overdraft for regular payroll suggests a structural cash flow problem that needs addressing through better working capital management.

Exceeding your agreed limit may incur an unarranged overdraft fee, a refused payment charge, and damage your banking relationship. Some banks allow a small buffer; others decline transactions automatically.

Invoice finance (factoring or discounting) unlocks cash from unpaid invoices at typically 1-3% of invoice value. For businesses with large debtor books, invoice finance is often cheaper and more scalable than an overdraft.

Overdraft capital refers to the working capital provided by a business overdraft facility. It is short-term, revolving debt capital. Unlike term loans, no fixed repayment schedule exists.

Many banks require a personal guarantee from directors or shareholders for business overdrafts, especially for newer businesses or those with limited trading history. This puts personal assets at risk.