Understanding NatWest’s business overdrafts

NatWest offers a range of financial products tailored to small and medium-sized enterprises (SMEs), including its Natwest business overdraft facility for customers of its business banking service.

Designed as a flexible short-term lending option, this overdraft acts as a financial safety net for businesses facing unexpected costs or delays in receiving payments. However, like all overdrafts, it comes with certain considerations and fees.

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How NatWest Business Overdrafts Work

A business overdraft with NatWest allows companies to withdraw more money than they have in their business account, providing a financial cushion for unforeseen expenses. Here's an overview of the key features:

• Eligibility: The overdraft is available to existing NatWest business customers. with a turnover of under £2 million, with other options for larger enterprises​​.
• Credit limit: Businesses can borrow up to £50,000 unsecured. For amounts exceeding £50,000, a meeting with a relationship manager is required​. This provides a range of options for businesses of different sizes, though larger borrowing limits require additional work.
• Interest rates: Interest is charged only on the amount borrowed, and the rate is calculated based on the overdraft balance at the end of each day. The representative EAR (Effective Annual Rate) is 14.75%, but this varies based on the size of the overdraft and repayment terms​.
• No minimum repayments: NatWest does not enforce minimum monthly repayments, allowing businesses to repay the overdraft in a manner that suits their cash flow​. This flexibility is particularly useful for businesses with fluctuating revenue streams.
• Setup fees: A one-off arrangement fee is charged based on the size of the overdraft. For instance, overdrafts below £500 incur a £50 fee, while those over £5,001 attract a 1.5% fee (minimum £150)​. 

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Key features of natwest business overdrafts

1. Flexibility: NatWest overdrafts can be adjusted through online banking, allowing businesses to increase or decrease their limits according to their changing needs​. 
2. Short-term finance: Overdrafts are provided on a 12-month rolling basis, meaning they are subject to annual reviews​. While this short-term structure offers flexibility, it may not be ideal for businesses requiring long-term financial stability.
3. Transparency: Interest is calculated daily and charged quarterly, and customers only pay for the funds they actually use.

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Why use a Natwest overdraft? 

NatWest’s business overdraft is handy for businesses looking for short-term borrowing solutions without the commitment of a fixed loan.

• Cash flow management: For businesses with fluctuating income or delayed payments, the ability to draw funds as needed provides a useful buffer. For example, if a business is waiting on an invoice payment but has a pressing supplier bill, an overdraft can cover that gap without needing to take out a larger loan.
• No fixed repayment schedule: This is especially important for businesses that prefer flexibility. You can reduce your balance by as much or as little as you want, provided you remain within your agreed limit​.
• Cost control: Unlike some other forms of financing, you only pay interest on what you borrow. For example, if you have a £20,000 overdraft limit but only borrow £5,000, interest is applied only to the £5,000 used​.
• Fast access to funds: In cases where a quick cash injection is required, overdrafts provide fast access to funds. Approved customers can access their overdraft within 24 hours, ensuring that urgent financial needs are met​.

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Limitations of Natwest overdrafts

Overdrafts are just one form of small business financing and won’t always be the best option for your company.

• While overdrafts are flexible and useful for short-term cash flow gaps, they might not be suitable for businesses needing long-term financing. 
• Overdraft interest rates can be higher than those of other small business loans, particularly if the facility is used for an extended period.
• Overdrafts are treated as part of your aggregated borrowing by Natwest – that means if you already have a loan with the bank, then your overdraft will be counted towards your credit limit in addition to your loan. This can limit the amount you can borrow on either facility.
• Businesses should also be mindful of unauthorised borrowing rates, which can add up if the overdraft limit is exceeded. This makes it essential to manage the facility carefully to avoid additional fees​.

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Comparing NatWest business overdrafts

While NatWest’s business overdraft offers flexibility, other financial providers or products may better suit businesses looking for longer-term or larger financing options.

If you don’t qualify for a Natwest overdraft, you’ve reached your credit limit, or you need a larger sum or longer term period, then an iwoca Flexi-Loan can help fund your business in under 24 hours.

iwoca is a leading UK provider of short term business loans for small businesses that can work with any bank account registered to your company. You can borrow £1,000 to £1,000,000 over up to five years, with full visibility over your repayments, costs and interest – and you can repay early with no extra fees.

• Fast, simple finance: Apply in minutes and get a decision in as little as 24 hours.
• Higher funding limits: If you’re not a Natwest customer, or you’ve reached your credit limit, then iwoca can help you access the funds you need for more ambitious projects with time frames that help you plan properly.
• Flexible management: Repay early with no penalties, and easily track and manage your payment schedule online.

Find out how to apply for an iwoca loan and see how we can help support your business’s financial needs.

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