Understanding NatWest’s business overdrafts

NatWest offers a range of financial products tailored to small and medium-sized enterprises (SMEs), including the 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 fees and various considerations.

How do 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, while other options are available 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) based on a £25,000 limit was 13.81% as of July 2025, but your interest rate will vary based on the size of your 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)​. 

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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Pros and cons of a NatWest business overdraft 

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

Advantages of NatWest business overdrafts

• 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 you’re waiting on an invoice payment but have a pressing supplier bill, an overdraft can help cover that gap without you 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: When a quick cash injection is required, overdrafts provide fast access to crucial funds. Approved customers can access their overdraft within 24 hours, helping to meet urgent financial needs.
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Limitations of NatWest business overdrafts

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

• Short-term funding: Overdrafts are primarily for short-term borrowing needs, leveraging the facility to cover temporary cash flow shortages, rather than long-term financing.
• Higher interest rates: Overdraft interest rates are typically higher than with term loans or secured borrowing. If you use this facility frequently or for prolonged periods, the cost of borrowing can become significantly higher.
• Counts towards overall borrowing limit: Overdrafts are treated as part of your aggregated borrowing by Natwest, meaning if you already have a loan with the bank, your overdraft will count towards your overall credit limit. So, you may not be able to access as much as you’d like.
• Risky when not managed well: Businesses should be mindful of unauthorised borrowing rates, which can add up if the overdraft limit is exceeded. It’s therefore important to manage the facility carefully to avoid additional fees, higher costs and reputational issues with the bank.
• Overdrafts are subject to set-up fees: You’ll need to pay an arrangement fee for setting up an overdraft with NawWest, which ranges from £50 to £375 for overdrafts up to £50,000.

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Comparing NatWest business overdrafts with other banks and lenders

We’ve outlined the pros and cons of NatWest’s business overdrafts and how they work. Now, let’s compare this with other popular bank overdrafts. 

The table below shows how NatWest business overdrafts stack up against overdrafts from Barclays, HSBC and Metro Bank. We also included iwoca’s business loan, which acts like a line of credit (in that you only pay interest on funds you draw down), to show how a flexible iwoca loan can be a great alternative to using an overdraft.

Natwest business overdrafts

Borrowing limit: £500 to £50,000 (unsecured)

Interest Rate (Rep. EAR*): 13.92%

Arrangement Fee: £50 for overdrafts under £500, up to 1.5% of the overdraft amount for higher amounts

Repayment terms: No fixed repayment schedule

Eligibility: Existing NatWest business customers (different criteria for those with turnover above and below £2m)

Metro Bank business overdrafts

Borrowing limit: Up to £60,000

Interest Rate (Rep. EAR*): 14.70%

Arrangement Fee: The greater of £50 or 1.75% of overdraft limit for overdrafts over £500. No arrangement fee for overdrafts of £500 and below

Repayment terms: No fixed repayment schedule

Eligibility: Available to Metro business account holders

iwoca Business Loans

Borrowing limit: £1,000 up to £1 million

Interest Rate (Rep. EAR*): Custom rates, depending on your business' creditworthiness and the amount borrowed

Arrangement Fee: No fee for 12-month loans (fees may apply for longer-term loans)

Repayment terms: Draw and repay flexibly over up to 60 months – no fee for early repayment

Eligibility: Open to limited companies and partnerships

*In the case of the overdrafts above, this applies to arranged overdrafts only.

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 business loan can help fund your business in under 24 hours.

How to choose between an overdraft and a short-term business loan

The above comparison table outlines the differences between NatWest’s business overdrafts and the overdraft facilities from other high street banks, while also comparing the key features and key considerations of iwoca’s short-term business loans. When choosing between using a business overdraft or a short-term business loan, you need to consider the following:

• How long do you need the funds for? 
• Do I need a lump sum to draw from or an ongoing credit facility?
• What amount of credit will cover my main liabilities while giving me funds to invest in the company’s growth?
• How much flexibility do I need from the credit facility? 
• How long do I need to repay the capital I borrow?

iwoca is a leading UK provider of 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 a matter of days or weeks or up to five years, with full visibility over your repayments, costs and interest. Also, like an overdraft, you only pay interest on the funds you actually draw down and use.

Here are some other key benefits to expect from iwoca Flexi-Loans:

• Quick and easy applications and access to finance – apply in minutes and get a funding decision in as little as 24 hours, with successful applicants often gaining access to funds on the same day.
• 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 – we tailor repayments to your needs and you can 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. You can use our business loan calculator to see your likely repayments.