Get matched with these top Australian business lenders
$200 Best Match Guarantee
30+ Lenders To Choose From
Personalised Rates For Your Business
100% Australian Customer Support
Shopping around for the right business overdraft can save you thousands of dollars in interest and fees.
In our business overdraft guide:
1
3
5
7
2
4
6
1
2
3
4
5
6
7
A business overdraft allows a business to borrow money by accessing funds greater than the amount available in a business trading account. Interest is only charged on the amount overdrawn.
A business overdraft is linked directly to your business account, giving business owners immediate access to funds.
This is what makes it different to a business line of credit, which is a similar credit facility but is not linked to a bank account.
A business overdraft is a popular form of business finance used in almost every industry, for managing working capital, purchasing inventory, and much more.
If you decide to get a business overdraft set up, applying with the bank you already have a transaction account with might seem like the most obvious first step. But you should compare multiple options first.
Like any kind of business finance, the interest rates, fees and other terms on business overdrafts can vary a lot depending which provider you go with.
With a business overdraft, expect to pay an application fee as well as a line fee, which will likely be quarterly or annually. The lender charges a line fee for keeping the overdraft facility open and it applies whether you use the overdraft or not. Line fees are either a flat amount or can be a percentage of the credit limit.
There can also be hefty fees if you draw down funds beyond your overdraft limit.
In our experience, not all lenders advertise the actual fees they charge. Instead, fees are "determined upon application" or something similarly vague. This is where we come in. We'll help you understand the business overdraft fees charged by multiple lenders, without you needing to apply first.
Data from Money.com.au lenders shown business overdraft interest rates can range from around 7.5% to 25% p.a.
That's quite a difference from highest to lowest. Particularly if you will have funds overdrawn on a regular basis, it’s important to look for the lowest interest rate possible (even though you’ll only be charged interest on funds withdrawn).
Your interest rate will be tailored to your business depending on factors like annual turnover and how long it’s been operating. Your personal credit rating may also be a factor.
According to the RBA, the average overdraft interest rate for a small business is 10.26% p.a.
You generally have the choice of a secured or unsecured business overdraft. A secured overdraft will be backed by an asset you or your business owns (usually residential or commercial property).
Interest rates and fees are usually lower on secured overdrafts. But if you need a quick approval, an unsecured overdraft is usually more straightforward to apply for.
Terms on a business overdraft range from 3 months to 5 years, or some involve a ‘revolving’ line of credit with no set term. Even if you agree to a set term with a lender, they may be able to review the overdraft facility at any time.
Importantly if you only need help with cash flow for a short period of time or one-off project, avoid signing up for an overdraft with a long or open-ended term. You'll likely be charged overdraft fees long after the overdraft has served its purpose.
A traditional bank overdraft typically won't have set repayment requirements. You essentially repay it as and when funds are deposited into your account. This is obviously a very flexible option. It can also be very expensive as interest charges are added.
Some of the smaller specialist lenders we work with set a minimum principal repayment amount on business overdraft facilities. This means there will be a limit on how much interest you will pay over time on the amount overdrawn.
There are two ways you could arrive at a suitable overdraft limit for your business:
A) What the lender is willing to offer you as a maximum credit facility; and
B) The amount you actually need.
Some fees are charged as a percentage of your limit. In other cases, there are fee bands. A higher overdraft limit could move you into a higher fee band. Either way, a higher overdraft limit than your business needs will cost you more.
If your business has a high turnover and needs fast access to funds on an irregular basis, an overdraft may be suitable as it offers quick and reliable access to funds.
In our experience working with Australian businesses, industries commonly using a business overdraft include retail, wholesale, manufacturing, professional services, food and beverage, technology and automotive.
A business overdraft is generally not as well suited to long-term capital investment, like purchasing an asset. In that scenario, equipment finance, a business car loan or chattel mortgage may be a better fit.
"We find that businesses using a business overdraft need cash flow really fast," says Money.com.au's Head of Sales, Arthur Peios.
"That could be for paying invoices, paying staff, doing fit outs or just having some extra working capital."
"With an overdraft, the funds are sitting there ready to go whenever you need them. At the click of a button, the funds are transferred straight to you."
"Some businesses look at an overdraft as a bigger credit card or charge card but without the big fees. For example, some of our lenders don't have monthly account keeping fees. You only pay interest on what you borrow. If you pay it off early, there's generally no early payment fees."
Let’s look at an example of how a business overdraft might be used.
To qualify for a business overdraft, you’ll need to pass the lender’s credit assessment criteria:
You can apply for a business overdraft with most financial institutions that offer business banking. However, many borrowers prefer non-bank and specialist lenders 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 for a business overdraft online through a 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.
Ready to compare business overdrafts?
Get your best offers from multiple lenders. There's no obligation and checking your rates won't impact your credit score.
GET STARTEDGET STARTEDShopping around for the right business overdraft can save you thousands of dollars in interest and fees.
Business Loan guides and resources
Learn more about your business finance options and how to get the funding you need to grow your business.
Hear from people who found the right loan
Usually not. Once you are approved for your business overdraft, you will be free to access the funds as and when they are required.
You'll still need to pay an annual facility fee for access to your overdraft, and remember that any amount used will incur interest charges until it is repaid.
Yes, you can apply without providing a deposit or any collateral as security. This is referred to as an unsecured business overdraft and a popular way to access funds quickly for a business. But much like unsecured business loans, the interest rate on an overdraft will likely be higher without security as there is more risk for the lender.
Interest rates on a business overdraft in Australia can vary widely, between around 7.5% and 25%. The average interest rate for a secured overdraft will be at the lower end of the range and, between 7.5% and 18.95%. For an unsecured business overdraft, rates are typically between 18.95% and 25%.
Yes. Provided you can demonstrate an ability to meet repayments on the new amount through increased business turnover, your lender should allow you to increase your overdraft limit.