Business Bank Accounts with Overdrafts
Best Business Bank Accounts with an Overdraft
A business bank account with an overdraft can offer a financial safety net if your business faces cash flow challenges or unexpected bills.
- Compare business bank accounts with overdraft facilities
- Offers a flexible way of borrowing which is available when needed
- No fixed repayments and only pay interest on the amount you borrow
Having a business bank account with an overdraft facility that can be dipped into if necessary can offer short-term cashflow support to both new and established businesses.
That’s because an overdraft is a line of credit attached to a business account that gives you access to additional funds, if there’s no money in the account. There will be a pre-agreed limit on the size of overdraft you’re allowed, which is the maximum you can borrow, and sometimes a fee for having the facility. But importantly, you only pay interest on the actual amount you borrow, rather than the overall limit.
Note that the accounts below offer the ability to arrange an overdraft facility, rather than an absolute guarantee that you will be granted one. Most business overdrafts are readily set up, but they are still subject to assessment and status, based on checks providers will carry out.
Our Top Business Bank Accounts with Overdrafts
Each of these products may be one of a range offered by the provider. Always check terms & conditions for suitability before applying. Only affiliated products are shown. Other products are available. Read our guide to ratings.
Provider | NerdWallet’s Rating | Monthly Fee | UK Card Purchase Fees | UK Bank Transfer Fees | |
|---|---|---|---|---|---|
 | Lite Business Account Best Online | Free | Free | Free | |
 | M Account for Business Best All-Rounder | Free | Free | From free | |
 | Business Account Best Business Support | Free for 12 months | Free | From free | |
 | Business Bank Account Best for Ethical Banking | Free | Free | Free | |
 | Start Up Business Account No Monthly Fees for 2 Years | Free | Free for 24 months | Free for 24 months | |
 | Business Account Best for Branch Access | Free for 12 months | Free | 100 electronic payments out free per month |
Best Business Account with Overdraft Providers
Monzo Lite Business Account
Free
Free
Free
n/a
- Available to sole traders, or the director of a registered limited company by shares (Ltd)
- Must be based in the UK
NerdWallet's Review Summary
Monzo’s Lite Account is a feature-packed online business bank account which offers no monthly fees, free instant UK bank transfers, plus the option of an overdraft facility if you’re an account holder.
Accounts can be opened fast, often the same day, and then give access to various payment collection options, digital receipts, international payments, and much more. In particular, eligible sole traders could get an overdraft of up to £3,000, on which there’s no set up or regular fees, and interest is only charged on the amount your account is overdrawn.
Monzo key features:
- No monthly fee
- Apply in minutes
- Card payments via smartphone or payment links
- Cash and cheque deposits
- Send and receive funds in 40-plus currencies
- Interest-paying savings pots
- Option to apply for overdraft
- FSCS protection
Who can apply?
To open a Monzo business account, you must be at least 16 years old, based in the UK, and either a sole trader or the director of a limited company (some other conditions apply to the latter).
You need to be 18 or over and have a Monzo business account to apply for a Monzo business overdraft. Overdrafts may be available to both sole traders and limited company directors, but the terms, interest rates and fees are different for each. For instance, there is an annual overdraft fee for limited companies, but not for sole traders.
See our Monzo Business Account Review.
NerdWallet's Pros & Cons
Pros:
- No monthly fee
- Free basic transactions
- Highly-rated app
- 24/7 customer support
Cons:
- No phone or branch banking
- Business accounts not available to partnerships
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
Virgin Money M Account for Business
- Available for eligible businesses with up to £1m annual turnover
- Must be based and operated in the UK (excluding Channel Islands, Isle of Man and Northern Ireland)
- All owners, directors, senior managers and account signatories must be over 18 years old
NerdWallet's Review Summary
The Virgin Money M Account is a terrific all-round business account that includes the option for a business overdraft too.
Among several features, the account itself stands out for having no monthly fees, free basic transactions and offering cashback on spending. In addition, you can apply for an overdraft facility that offers clear, straightforward fees and rates, and can be used as and when you need.
Virgin Money key features:
- No monthly fees
- No basic transaction fees
- Cashback on debit card purchases
- Free trial of Xero accounting software
- Dashboard to monitor cash flow and more
- Manage via app, online, in branch and by phone
- Optional overdraft on application
- FSCS protection
Who can apply?
In order to apply for the Virgin M Account, your business must have an annual under £1 million and be based in the UK (excluding Northern Ireland, the Channel Islands and the Isle of Man). As the applicant, you need to be at least 18 years old.
To be considered for an overdraft, your business must undergo a credit assessment and needs to show a minimum 12 months of trading activity.
See our Virgin Money Business Account Review.
NerdWallet's Pros & Cons
Pros:
- No monthly account charge
- Free basic transactions
- Cash flow tracking dashboard
Cons:
- Free account only for businesses with less than £1 million turnover
- Establishment fee to set up overdraft
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
Barclays Business Bank Account
NerdWallet's Review Summary
The Barclays Business Account has no monthly fees for 12 months, free standard transactions, plus a potential overdraft facility of up to £50,000.
The inclusion of free invoicing and accounting software from FreshBooks should help make running any business easier, while various discounts and rewards are available on debit card spending.
Barclays key features:
- Free standard transactions
- No monthly fee for 12 months
- Free accounting and invoicing software
- Potential discounts with partners including AWS and Meta
- Tailored sector-specific support
- Option to apply for overdraft
- Manage online, via app, over the phone or in branch
- FSCS protected
Who can apply?
To apply for a Barclays Business Account, you must be at least 18 years old and a UK resident.
Approval for a Barclays business overdraft is subject to application and status, including your business’s financial circumstances and history of borrowing.
See our Barclays Business Account Review.
NerdWallet's Pros & Cons
Pros:
- Free basic transactions
- Free FreshBooks accounting software
- Tailored business support
Cons:
- £8.50 monthly fee after first year
- Fees may apply for having overdraft facility
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
The Co-operative Bank Business Bank Account
NerdWallet's Review Summary
The Co-operative Bank’s Business Bank Account has no monthly fees, no fees for standard transactions (excluding cash/cheque), and free unlimited access to the Go Get Paid app.
If eligible, there’s also an optional overdraft facility, with a standard borrowing limit of £250,000 – an even higher limit could be discussed if necessary.
Co-Operative Bank key features:
- No monthly fee
- No fee for basic transactions
- Exclusive Clover payment solution offers
- Integrate accounting software
- Option to apply for overdraft
- Ethical banking policy
- FSCS protection
Who can apply?
To apply for The Co-operative Bank Business Bank Account, all applicants and key people must be aged 18 or over and UK residents, with a business address in the UK. The account is for sole traders, limited companies, partnerships, or limited liability partnerships with up to 10 key individuals.
Access to an overdraft is subject to status and eligibility. A credit assessment and a credit check will be necessary on your business and key individuals.
NerdWallet's Pros & Cons
Pros:
- No monthly service fee
- Free standard transactions (excluding cash/cheque)
- Arranged business overdraft of up to £250,000 (subject to status and eligibility)
Cons:
- No branches in Northern Ireland
- Arrangement fee to set up overdraft
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
NatWest Start Up Business Account
- Available to eligible customers over 18, who have the right to be self employed in the UK
- This ‘Startup business account’ is available for businesses that have been trading for less than 1 year and have a projected or existing annual turnover of less than £1m
NerdWallet's Review Summary
NatWest’s Startup Business Account has no monthly fees and free basic UK transactions for two years. A business overdraft facility for up to £50,000 can be applied for online.
Free accounting software from FreeAgent is included, along with helpful tools such as instant payment notifications, cheque deposits via app, and spending breakdowns.
NatWest key features:
- No monthly fee
- No basic transaction fees for 2 years
- Free accounting software from FreeAgent
- Highly rated mobile app
- Option to apply for overdraft
- FSCS protection
Who can apply?
The NatWest Start-up business account is for UK-registered businesses that have been trading for under a year and have an annual turnover of less than £1 million. A different account is available if your business is more established. You must be 18 or older to apply. One person on the application must be a UK resident.
Approval for an overdraft is subject to credit approval. An accurate declaration of income is required. Details of partners, members, directors or signatories of the business will be needed, along with business details if you have a limited company.
See our NatWest Business Account Review.
NerdWallet's Pros & Cons
Pros:
- No monthly fees
- Two years of free basic transactions
- Free accounting software from FreeAgent
Cons:
- Charges on basic transactions after two years
- Set up fee for overdraft
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
Lloyds Bank Business Account
- To qualify for this account you need to be a sole trader, partner or company director and be aged 18 or over
- You must have a turnover of less than £25m
- Must not already have a Lloyds Bank business account for this business
NerdWallet's Review Summary
The Lloyds Bank Business Account offers no monthly fees for 12 months, free accounting tools and debit cards, and overseas payments. There’s a Lloyds business banking app, but also a vast branch network which makes Lloyds a good choice if you value face-to-face support.
Once a new account is set up, you can apply for an overdraft of up to £5,000 and get an instant decision using the app, and potentially as much as £50,000 going forward.
Lloyds Bank key features:
- No account fee for first year
- 100 free outgoing electronic payments each month
- Free accounting software
- Set account access levels for others
- Bank via the app, online, in branch or over the phone
- Apply for overdraft by app
- FSCS protection
Who can apply?
To apply for a Lloyds Business Account, you need to be at least 18 years old, a UK resident and have a UK mobile phone number. You can be either a sole trader or director of a limited company, but annual turnover must be less than £25 million a year.
A separate application made online or using the app is required for an overdraft. Approval is subject to status and not guaranteed.
NerdWallet's Pros & Cons
Pros:
- No monthly fee for 12 months
- UK-wide branch access
- Potential overdraft up to £50,000
Cons:
- £8.50 monthly fee after first year
- Certain transactions have fees
- Monthly fee for overdraft
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
Do all business bank accounts offer overdrafts?
Many business bank accounts offer overdrafts, but not all. The major high street banks in particular tend to provide business overdrafts as an option, but there are some online providers, such as Monzo, that offer them too.
How do business bank account overdrafts work?
Business account overdrafts are one of the simplest ways to borrow.
It might be possible to arrange an overdraft facility when first opening a business bank account, or you could ask to set it up at a later date. Providers typically look at the finances and credit score of your business to decide whether to offer an overdraft and a maximum borrowing limit – often referred to as your arranged overdraft limit.
Once in place, an overdraft facility can be used whenever needed, if there are no other funds in the account. For example, if an account is £500 in credit, and a payment of £800 goes out, the overdraft would automatically be used to cover the £300 shortfall.
Anything that is borrowed under an overdraft is paid back automatically as money goes into the account. So if you’ve used £300 of your overdraft, and £200 is credited to your account, you’ll still be £100 in your overdraft until that amount of money, or more, goes in.
As there are no fixed monthly repayments on an overdraft, it can be paid off as and when finances allow. However, with charges usually payable on whatever is borrowed, it may not make sense to sit in an overdraft any longer than is needed.
Business account overdraft rates and fees
Interest is payable on the amount you are borrowing via an overdraft at any given time – you don’t pay interest on any part of your overdraft limit that is unused Overdraft rates can vary between account providers, and could also change at short notice.
Depending on the provider, there may also be an arrangement fee for getting the overdraft facility set up, a renewal fee payable every year to ensure ongoing access to the overdraft, and maybe a change fee, if you wish to increase your overdraft limit.
Be aware that higher interest rates and perhaps penalty charges may become payable if you exceed the agreed overdraft limit, and move into what is called an unarranged overdraft.
Who might want to open a business account with an overdraft?
The financial buffer offered by a business account overdraft is likely to prove helpful to any business which runs tight in terms of cash flow and banked funds. This includes sole traders, partnerships, businesses set up as limited companies and startups.
A business overdraft could help meet the short-term costs involved with growing your business or dealing with seasonal fluctuations in income. For example, if you need to pay wages through a quiet period for your business, an overdraft may be useful as you can repay the money during busier periods when your income increases.
» MORE: How to choose the right business bank account for you
How could a business bank account with an overdraft benefit you?
There are several benefits to having a business bank account, regardless of whether it includes an overdraft or not. These include keeping your business finances separate, simplified tracking and monitoring, the features and tools on offer, and the professional aspect of having a dedicated business account.
In terms of the main advantages of having an overdraft on your business account, these include:
- Simple to set up: It usually only takes a quick online message or phone call to your business bank account provider to get an overdraft in place and ready to use.
- Easy to get: Applications for business overdrafts are rarely turned down, unless a provider has concerns over a business’s credit history or ability to repay.
- Funds are readily available: Once arranged, a business overdraft offers immediate and easy access to funds which can be used without further permission or waiting for funds to clear.
- Bridge cash flow gaps: The seamless availability of funds can help overcome unexpected cash flow problems or provide a safety net for seasonal businesses.
- Pay for what you use: Interest is only charged on the amount you borrow, and not the entire overdraft that is available to use.
- Flexible repayments: As a general rule, overdrafts can be repaid on your own terms, as and when funds are available.
What do you need to be aware of?
Some things it’s important to consider about business bank account overdrafts include:
- Interest rates: The interest rates charged on business overdrafts are often higher than you might find on business loans and other options for securing credit.
- Additional fees: Some providers charge fees simply for having an overdraft facility or if you want to renew.
- Penalty charges: Much higher charges and interest rates are usually payable if you borrow more than you’re allowed and stray into an unarranged overdraft.
- Short-term: The relatively high cost of borrowing means business overdrafts should only really be considered a short-term solution.
- Low amounts: Overdrafts are usually for lower amounts than you can borrow through a business loan.
- Facility could be withdrawn: A provider could withdraw an overdraft facility and request you repay what is owed on little notice.
Will I be eligible for a business account overdraft?
You will need to be eligible to open a business bank account with your chosen provider itself, before they then assess whether you also qualify for an overdraft.
Requirements can differ between providers, but generally you’ll need to be at least 18 years old and have a UK-based business to get a business bank account. Some accounts may also require that your business has a certain turnover or been trading for a minimum period of time.
When deciding whether to allow you a business overdraft, much depends on how likely it is you’d be able to repay anything you borrow. This means revenue, cash flow, outgoings and any existing debts could all be important, as well as your business’s credit score. Some providers might have different rules, depending on whether you’re a sole trader or limited company.
If it’s too soon for your business to have a credit history, or you’re a sole trader, your personal credit score may be considered. It’s possible you might be asked to provide a personal guarantee, meaning you’d have to repay what is owed from your own personal finances if your business can’t.
How to apply for a business bank account with an overdraft facility via NerdWallet UK
Applying for a business bank account with an overdraft through NerdWallet takes three steps:
- Select the business bank account that best suits your needs from those above.
- Click the ‘See Deal’ button to be taken directly to the provider.
- Apply for the account with the provider itself – there’s no forms to fill in for us.
» TAKE ME TO: NerdWallet’s best business bank accounts with overdrafts
Alternatives to using a business bank account overdraft
If you’re not sure whether using an overdraft on a business bank account is the right option for you, some other ways businesses can raise finance include:
- Small business loans, which may be better suited if you have longer term or larger borrowing needs.
- Business credit cards, which could potentially offer an interest-free way to borrow if it’s paid off in full every month.
- Merchant cash advance, which is repaid automatically from future debit and credit payments your business receives.
- Invoice finance, which allows you to secure funding against unpaid invoices.
Other types of business bank account
Business bank account with overdraft FAQs
Business account overdraft limits differ between providers, but a typical business overdraft facility might range anywhere from £500 up to £100,000. The finances of your business, its credit score, and maybe your own credit rating, could all be considered by a provider when deciding exactly how big an overdraft your business might be allowed.
Any increase in your business account overdraft limit would need to be assessed and approved by your provider. Depending on the provider, there could be a charge for raising the limit.
Overdrafts on business accounts are convenient for managing cashflow short-term, will only charge interest on the amount borrowed, offer flexibility over repayments, and are likely to be easier to arrange than a business loan. On the other hand, business loans might have lower interest rates, allow larger loan amounts, and don’t have the risk of being suddenly withdrawn.
A good credit score is likely to be beneficial in securing a business bank account with an overdraft, as credit history – both your own and that of your business – is something providers might consider when assessing an application. It may still be possible to get a business account and an overdraft with poor credit, but you’re likely to have fewer options, and overdraft rates may be higher.
» COMPARE: No credit check business bank accounts
Image source: Getty Images
Dive even deeper
Compare Instant Business Accounts
Compare Limited Company Business Accounts
