We compare the key features of some of the top providers, including Barclays, Lloyds, HSBC, NatWest, Santander, and Royal Bank of Scotland (RBS), to help you decide which might offer the best business overdraft for your needs.
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A business overdraft provides a handy cushion for small businesses looking to manage cash flow gaps or cover unexpected expenses. The majority of UK banks offer competitive business overdrafts, including both high street and alternative banks, each with different terms, interest rates, and conditions.
Barclays is a popular choice for businesses seeking flexible overdraft solutions. They offer overdrafts ranging from £1,000 to £50,000. Interest rates are 14.71% to 18.30% EAR, depending on the overdraft size. Overdraft fees range between £95 and £295, with options for limits beyond £50,000 available upon request.
Key Features:
Lloyds’ business overdraft offers simple and clear terms, making it a solid choice for businesses with an annual turnover of less than £3 million.
The overdraft limit can go up to £25,000, and the interest rate is 10.85% above the Bank of England base rate for small businesses. Fees include a one-time arrangement fee and a small monthly usage fee if the overdraft is not cleared within the month.
Key Features:
HSBC offers a flexible business overdraft solution with same-day approval for amounts up to £30,000, making it a good option for businesses needing quick access to credit.
The EAR (Effective Annual Rate) is 15.96%, and the arrangement fee is typically 1.75% of the overdraft limit, with a minimum fee of £25. Larger amounts can be negotiated, and HSBC’s overdraft is ideal for businesses that need flexibility.
Key Features:
NatWest provides overdrafts of up to £50,000 with competitive interest rates and arrangement fees. The interest rates are 14.64% to 14.75% EAR, and fees start from £150, depending on the borrowing amount. NatWest also offers flexible options for businesses looking to adjust their overdraft limit as needs change.
Key Features:
Santander’s business overdraft offers competitive rates, especially for small to medium-sized enterprises. Businesses with a turnover under £3 million can access overdrafts of up to £25,000 with an interest rate of 10.00% EAR. Fees include a 1% annual arrangement fee (minimum £50), and the bank offers robust mobile and online banking tools to help businesses manage their funds.
Key Features:
Royal Bank of Scotland (RBS) offers a similar business overdraft structure to NatWest, with borrowing limits up to £50,000. The EAR for overdrafts typically ranges from 14.64% to 14.75%, and fees start at £50 for smaller limits, scaling up to £375 for the largest overdrafts. This option suits businesses needing medium to large credit facilities.
Key Features:
As one of the younger banks on this list, Metro Bank is known for its strong customer service and ease of access.
With overdraft limits of up to £25,000, Metro Bank offers a straightforward application process and flexible terms. One of the standout features is that the monthly fee is waived if you maintain a balance over £6,000, and they offer 30 free transactions per month. The representative interest rate is 15.57% EAR, with an arrangement fee of 1.75% or £50, whichever is greater.
Key Features:
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Choosing the best business overdraft depends on your business size, financial needs, and the flexibility you require. Here are some top recommendations based on specific needs:
A business overdraft is a short-term credit facility that allows a business to spend more money than is available in its account. It helps manage cash flow issues, pay bills, or cover unexpected expenses.
Most banks require a personal guarantee, especially for higher limits. For example, Starling and HSBC often ask for a guarantee when overdrafts exceed a certain threshold.
Limits vary by provider. Most banks offer overdrafts from £1,000 to £50,000, but some providers allow higher limits upon request.
An arranged overdraft is pre-agreed with the bank, while an unarranged overdraft occurs when you exceed your account balance without prior approval. Unarranged overdrafts typically come with higher fees.
Yes, applying for a business overdraft may result in a credit check, which can temporarily lower your credit score. However, responsibly managing the overdraft can improve your credit over time.
Each business overdraft provider has its strengths, from Barclays' high limits to HSBC's fast approval process. Choosing the right one for your business depends on your specific needs, whether it's low fees, high borrowing limits, or excellent customer service. Compare rates and terms carefully to find the best business overdraft for your situation.
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