In this article, we will break down how Monzo’s business overdrafts work, why they could be beneficial for businesses, and the alternative finance options available for limited companies, including small business loans.
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Monzo, one of the UK’s leading digital banks, is an increasingly popular choice for businesses – doubling their business customer-base in the last year. However, while Monzo business overdrafts are available for sole traders, there is not currently a formal overdraft facility available for limited companies.
Monzo business overdrafts are designed for sole traders who need quick access to additional funds. These overdrafts are integrated within the Monzo Business account, offering a simple, straightforward way to borrow through the app.
Here’s how Monzo's business overdraft works:
For sole traders, the overdraft can provide a quick cash buffer to manage short-term needs.
However, Monzo's decision to limit its business overdrafts to sole traders leaves limited companies stranded. For growing businesses with more complex needs, who often require larger, more flexible funding options, this means turning to alternative finance sources.
For sole traders, Monzo’s overdrafts can be a handy tool for managing short-term cash flow issues.
All this means that Monzo business overdrafts are a great option if:
If you're a limited company—or even a sole trader needing more flexibility—there are plenty of alternative funding options available.
For limited companies needing quick access to finance, a short term business loan may be a better option.
iwoca offers digital small business loans from £1,000 to £1,000,000, with terms as short as one day or as long as five years. And since it’s all online, you can get approved in as little as 24 hrs.
We’ve helped over 120,000 small businesses invest in growth, manage their cash flow and keep up with changes in the market. And unlike overdrafts, which are designed for short-term needs, a business loan can help with larger investments or ongoing projects.
For day-to-day flexibility and small credit uses, a business credit card can offer flexible, revolving credit that can be used for one-off expenses or unexpected costs.
Many cards come with interest-free periods and rewards like cashback or air miles, making them a handy tool for managing short-term financial needs. However, interest rates can be high if balances aren’t repaid in full each month, so you’ll need to keep an eye on how much you’re using them. Business credit cards work best for companies that need short-term credit with clear repayment plans.
For businesses working primarily with card or online sales, a merchant cash advance can help you access finance, without taking on the traditional repayment schedule of borrowing.
With an MCA, you receive a lump sum upfront, and repayments are automatically deducted as a percentage of your daily card sales. This flexible repayment means you pay more when business is good and less when it's slow. It’s handy for businesses needing fast access to funds without fixed repayment schedules.
Invoice finance is another form of borrowing set against future revenue, where businesses can unlock cash tied up in unpaid invoices.
This option is especially useful for B2B companies with long payment terms. Instead of waiting 30, 60, or even 90 days for payment, you can receive up to 90% of the invoice value upfront. This improves cash flow without taking on new debt, and the balance is paid once your client settles the invoice.
Monzo’s business overdraft is a convenient, flexible solution for sole traders, offering a transparent and digital-first way to manage short-term borrowing. However, if you’re a limited company or you need more funding than Monzo’s overdraft can offer, alternatives like iwoca’s Flexi-Loan can provide greater accessibility, larger limits, and longer repayment options.
See how easy it is to apply for a loan with iwoca and discover how we can help your business access the flexibility you need.
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