Business Overdraft

A business overdraft is an extension of credit by a lender that allows a business to access funds greater than the amount available in its business trading account.

It is often linked directly to your business account, allowing business owners immediate access to available overdraft funds. You can choose to apply with a bank or non-bank lenders.

A business overdraft is a popular form of business finance used in almost every industry, for managing working capital, purchasing inventory, funding new developments, and much more. In Australia, industries commonly using them include:

• Retail
  

• Wholesale
  

• Manufacturing
  

• Professional services
  

• Food and beverage
  

• Technology
  

• Automotive
  

You can choose to apply with no security — called an Unsecured Business Overdraft — or provide security backed by property.

Below we'll look at two examples of how a business overdraft might be used.

How a business overdraft works

In the first example:

• A business is approved for an overdraft of $500,000
  

• The business withdraws $400,000
  

• The amount accruing interest is $400,000
  

• The remaining overdraft amount is $100,000
  

• The business has an annual turnover less than $5m
  

• The business will make weekly repayments
  

In the second example:

• A business is approved for an overdraft of $500,000
  

• The business withdraws $25,000
  

• The amount accruing interest is $25,000
  

• The remaining overdraft amount is $475,000
  

• The business has an annual turnover of more than $5m
  

• The business can choose between weekly or monthly repayments
  

To qualify for a business overdraft, lenders will need to conduct a credit assessment. While the most important consideration for any loan is your ability to repay the borrowed amount, you can only apply if:

• You have a valid Australian Business Number (ABN); and
  

• You are an Australian citizen or permanent resident; and
  

• You have a residential address in Australia; and
  

• Your business is registered for GST; and
  

• Has an annual turnover of at least $250,000; and
  

• Has been operating for at least three years; and
  

• You have a good credit history; and
  

• You intend to use the overdraft entirely or predominantly for business purposes.
  

You can apply for a business overdraft with some banks, though many borrowers will seek out non-bank lenders and specialist lenders, often due to the fast approval time and access to funds offered by these companies.

Most specialist non-bank lenders will also allow you to apply online through a quick and simple form.

If you are looking to borrow up to $150,000, some specialist lenders will only require business bank statements to grant approval — you could apply online and have the funds available the next day.

You can apply for a Business Overdraft with GetCapital. Read our review of the lender or compare finance options from Australia’s leading business lenders by visiting our Lender Reviews section.

A business overdraft isn’t ideal for every business. However, if your business has a high turnover and needs fast access to funds on an irregular basis, an overdraft may be more suitable than other forms of finance, such as a line of credit. In summary, business overdrafts in Australia:

• Range from $25,000 to $500,000
  

• Usually involve an easy application process
  

• Allow access to secure funds at any time
  

• Only accrue interest on the amount withdrawn
  

• Are assessed according to business turnover
  

• Can be approved very fast by non-bank lenders