Best Business Accounts with Overdrafts

Use CompareBanks to get the best business overdraft accounts, in this review.

Updated: May 21, 2024
Matt Crabtree

Written By

Matt Crabtree

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Unexpected business expenses, such as repairing broken equipment or the loss of a large order, are a common source of stress for business owners and can quickly deplete available funds in a company bank account.

It is possible that an overdraft facility might help, but only if all other options have been exhausted first. Overdrafts are an unsecured line of credit used to cover sudden expenses.

They are a feature of business checking accounts that allow you to make purchases even if your account balance is zero.

Find the best business overdraft rates and fees from the UK's top business banks using this CompareBank guide.

ProviderScoreDetails
1. Starling Bank★★★★★Click Here
2. Metro Bank★★★★★Click Here
3. Santander★★★★★Click Here
4. Barclays★★★★Click Here
5. NatWest★★★★Click Here
6. HSBC★★★★Click Here
7. Royal Bank of Scotland★★★★Click Here
8. TSB★★★★★Click Here
9. The Co-operative Bank★★★★★Click Here

At a Glance, pros and cons

This section is for you if you want a flash summary of the pros and cons of business account overdrafts.

Pros

✔️ Convenience — Overdrafts for companies are a useful way to cushion the blow of unforeseen expenses.

✔️ Personal use — The money is yours to do with as you like. Borrow investment money whenever is convenient for you.

✔️ Simplicity with interest only on use — Interest is only due if you actually use the overdraft service. Requires nothing more than a company checking account.

Cons

❌️ Insidious — The costs may add up quickly, even if you never use the service. And repaying can become harder than expected. Make sure you have good control and awareness over your finances. 

❌️ Account and credit barriers — Unless you are willing to move your whole business checking account, in order to batch the whole business checking process, it might be difficult to look around for the cheapest overdraft rate and incorporate it seamlessly. It’s also limited to companies with excellent credit ratings.

Top business accounts with overdrafts — reviews

As always, let’s get right down to business, no pun intended, and discuss the best overdraft business accounts. All are available to residents of the United Kingdom and are regulated by bodies like the FSCS.

1. Starling Bank — Most-loved business account with overdrafts by the UK

Digital accounts offered by Starling Bank, which have won many awards, are wildly popular in the UK. Their updated take on conventional banking provides all the same safe features and services as brick-and-mortar banks, but in a more convenient, paperless format.

Starling's business overdrafts range from £1,000 to £50,000, and the interest rate is either 15%, 10%, or 5% EAR (the average annual percentage rate).

The arranging cost is 1.75 percent of the credit line, with a £50 minimum. Starling, unlike some other online banks, is completely regulated and provides financial services to more than 450,000 companies in the United Kingdom.

Starling Bank, like most other banks, offers the basics, but the award-winning challenger bank shines with the extras, tools, and services it offers, some of which may be indispensable to a startup or small company.

A few complaints have been raised, most of which centre on issues with customer service or variations from traditional brick-and-mortar banks. Starling has a hard time competing with the larger banks since its clients feel more secure with them.

Download the Starling Bank app from the App Store or Google Play, or apply for a business account directly on their website. A Starling Bank account might be yours if your company qualifies and your application is approved.

2. Metro Bank — Next-best overdraft business account

The overdraft fee is proportional to the amount actually used by the online account customer. A £50 arrangement charge and a variable interest rate of 10% EAR apply to all arranged overdrafts up to £25,000. Rates for overdrafts in excess of £25,000 are negotiable upon request.

Although it only opened its first branch in 2010, Metro Bank has rapidly expanded across the South East of England, where it now serves over a million business customers. Metro Bank became a challenger bank when it launched for business after no other bank had done so in over 150 years.

Metro now provides business checking and savings accounts in addition to business financing. When compared to the other main UK banks, Metro Bank came out on top in an impartial assessment of business current account providers.

Both small enterprises and multinational conglomerates may open current accounts. With a balance of £6,000 or more, you may enjoy free monthly account maintenance, in addition to 30 free UK transactions.

Monthly costs of £6 + UK transaction fees of £0.30. Your account may be opened and managed over the phone, online, or in person at any of our seven locations every week.

3. Santander — Established British business account with overdrafts

Santander has managed to survive the banking and geopolitical conflict continuing to provide overdrafts to companies with limits ranging from £500 to £25,000.

The average APR for an overdraft facility is 10%, and the arrangement charge is 1% of the overdraft capacity, with a £50 minimum.

Bit about them: the Spanish Santander Group founded in 1857 owns the UK's Santander bank. From Santander's first entry into the UK in 1988 until the completion of their rebranding at the end of 2010, there were several mergers.

Today, they are one of the largest financial services companies in the world, serving more than 24 million customers through 500+ locations in the United Kingdom alone. Cater Allen Private Bank is Santander's other private banking option.

This is a new financial company that aims to compete with Britain's “Big Four”. Santander Business Banking provides services such as checking and savings accounts, loans, insurance, credit cards, and more to businesses.

Both new and existing companies may open a Santander current account and take use of the bank's overdraft services. Both new companies and account switchers are eligible for free or subsidised banking for a period of 12 months.

Monthly fees range from £7.50 to £12.50. Your account information is always accessible through the website and mobile app. The 123 Business Current Account provides annual cashback of up to £300.

Clubs, societies, and nonprofit organisations may also take use of their free everyday banking services by opening a Treasurer's Current Account.

4. Barclays — Popular UK overdraft business account

To help you and your business with day-to-day financial flow, Barclays provides unsecured company overdrafts of up to £50,000.

The minimum fee to borrow money is £95, and interest rates range from 0% to 100% of the Bank of England's base rate. Interest is only charged on overdrafts, and the whole debt may be repaid whenever you wish.

Barclays is a classic British bank that has been around since the 1700s; it was an early adopter of both automated teller machines and debit cards. They are one of the four largest banks in the country, with more than 1,500 locations catering to businesses of all shapes and sizes. Discover the ideal Barclays business banking service for you, for your savings and borrowing needs, whether you prefer online or in-branch banking.

Overdrafts in the range between £1,000 and £25,000 may be obtained for businesses. Overdraft interest rates range from 13.40% for balances between £1,000 and £5,000 to 8.43% for balances between £20,000 and $25,000.

Also variable are the arrangement fees, which range from a flat rate of £95 to £295 for limits up to £15,000 to a rate of 1.6% to 2.5% of the agreed limit for overdrafts above that threshold. Rates and fees may be negotiated for overdrafts in excess of £25,000 (up to £50,000) for firms that apply.

5. NatWest — Trustworthy business account with overdrafts

Overdrafts from NatWest may range from £500 to £25,000 for firms with annual revenues of less than £2 million and last for a period of 12 months. There is a range of 11.73% to 11.62% in interest costs, and arranging fees range from £50 to £375.

If a company has a revenue of above £2 million or has access to a Relationship Manager, they may be eligible to borrow up to £50,000, double the standard business loan amount of £25 000.

As for their record: as one of the “Big Four” UK commercial banks, NatWest securely serves the financial needs of one in four companies in the country. Originally founded in 1968 as National Westminster Bank, they are now a subsidiary of the considerably bigger NatWest Banking Group, which also includes the Royal Bank of Scotland and the Ulster Bank.

Avoiding customer service at all costs is a must. Business account-specific reviews were unavailable; nonetheless, many Trustpilot and Reviews.co.uk reviewers were generally negative about NatWest.

Customers complain that they have a hard time getting answers to their questions or getting assistance when they need it. Their primary concern is with customer service.

6. HSBC — International business account with overdrafts

One of the largest banks in the UK, I’ve written about HSBC in the past, on several occasions.

Overdrafts of up to £30,000 are available to companies via HSBC. Despite having begun in Hong Kong in 1865, HSBC has become one of the Big Four Banks, with branches all over the United Kingdom.

After more than 150 years in operation, the company has more than 15 million commercial clients and more than 600 locations in the United Kingdom alone. The initials stand for The Hongkong and Shanghai Banking Corporation Limited, thus the abbreviation HSBC.

An annual arrangement cost of 1.75% of the agreed amount, or a minimum of £25 is added to the interest rate of 12.85% EAR that is changeable. A business overdraft may be set up for anything from one month to one year, with annual reviews.

Daily compound interest is levied on the amount that is actually drawn down. When the overdraft is authorised, an arrangement fee will be determined.

Over 9,800 users have rated the HSBC Kinetic app, giving it a near-perfect 4.8 stars. The ratings on Google Play are positive, with an average rating of 4.2 stars out of 5. However, out of over 7,000 reviews on Trustpilot, 89% have given HSBC only 1 star.

7. Royal Bank of Scotland — Well-reviewed business overdraft account

Businesses with annual revenues of less than £3 million and those with annual revenues of between £3 million and £25 million are eligible for arranged overdrafts from Bank of Scotland ranging from £500 to £25,000.

The Bank of Scotland was established in 1695, making it the oldest and hence also the first Scottish bank.

They are a well-known high street bank that joined the Lloyds Banking Group in 2001 with Lloyds Bank and others, giving them access to 320 years' worth of banking expertise to share with its more than 150,000 business customers in the United Kingdom.

The Royal Bank of Scotland is a separate financial institution from the Bank of Scotland.

For overdrafts between £500 and £5,000, the arrangement cost starts at £12 per month, while for overdrafts between £5,001 and £25,000, it is 1.99% per year (£120 minimum). If your company needs an overdraft of more than £25,000, which can be integrated with accounting software.

An overdraft of £5,000 or less may be opened for free, however there is a £12 monthly cost for its use. An annual fee of 1.99% is assessed for overdrafts from £5,000 to £25,000.  A rate of interest of 10.85% per year over the Bank of England Base Rate will be applied. Money earns interest only while it is being used.

8. TSB — Top business account with overdrafts for good fees

The maximum overdraft limit from TSB is £7,000, and overdraft fees begin at 10.65% EAR representative after that. Furthermore, there is an arrangement fee ranging from £150 to £250.

TSB has 550 locations in England, Wales, and Scotland and serves 4.6 million individual and corporate clients.

Established in 1985 as Trustee Savings Bank plc, TSB continues to provide a variety of banking services, including current accounts, savings accounts, debit and credit cards, loans, and financing for companies and nonprofits.

TSB provides two types of checking accounts, one tailored to small enterprises and another to nonprofits. The business account costs £5 per month and is accessible online and through smartphone around the clock.

If your account balance at TSB is above £10,000, the monthly charge will be waived. If account holders who switch to our bank comply with our terms and conditions, we will waive our monthly service fee for 25 months.

You may get an unsecured loan for up to £25,000 and a loan of up to £100,000 for your company, with terms ranging from 1 to 25 years. The sample annual percentage rate (APR) for this loan is 9.94%.

The loan's conditions, amount, and duration all go towards the arrangement fee's range from £100 to £250. New applications for TSB business credit cards are not being accepted at this time.

9. The Co-operative Bank — Popular business account with overdrafts for easy use

The Co-operative Bank was founded in Manchester in 1872 as an ethical financial institution. The bank does not put money into companies that engage in things like selling weapons, using fossil fuels, or experimentation on animals because of ethical concerns.

They have a limited branch presence in the UK's larger urban areas. Co-operative offers current accounts, business financing, and savings solutions to its business clientele.

Any company can apply for an overdraft, secured or unsecured, up to £250,000. The Bank of England Base Rate is used to determine the variable interest rate. The current rate for prearranged overdrafts is 6.28% (representative EAR changeable). In addition, there is a £50 minimum overdraft arrangement cost of 1.5%.

Borrow between £1,000 and £250,000 for a repayment period of 1-15 years for company financing and loans. There is a monthly interest payment that fluctuates. A Charge Card is available to business users of the Co-operative for a monthly cost of £2 per card, with an interest-free period of up to 48 days.

Best business account with overdrafts — Buying Guide

More business-oriented considerations of overdraft business accounts will be covered here. This next section may be useful if you are aware of the debt aspect and are seeking methods to minimise or eliminate it.

What is a business overdraft account?

In the same way that a personal overdraft enables you to keep spending even when your bank account balance drops below zero, a business overdraft does the same thing for your company's checking or savings account.

You may choose to have one as part of your account, just as with a personal account. There are a number of expenses and payments that must be made, so think carefully about your alternatives before applying.

Tell me the process of opening a business overdraft account

To begin with, the bank you choose will need to verify your identity and address in order to do necessary background checks. In addition to a picture ID (passport, national identification photocard, or driver's licence), you will need to provide proof of your UK residence in one of the following ways:

  • Proof of payment, such as a recent bank or credit card statement (not more than three months old) that was not printed online;
  • Mortgage statement (not printed from the internet and no older than 12 months);
  • Newer than 12 months council tax bill, payment book, or exemption document;
  • Note or bill from a service provider (must be no more than six months old; mobile phone bills are often rejected by banks).
  • A third party's authority over your account or ownership of a significant stake in the firm may need similar verification procedures.

Who can get a business account with overdrafts?

A business overdraft is a flexible and inexpensive option to borrow money that may be used to cover unforeseen expenses (such as bills, invoices, and the like) or to address temporary cash flow problems.

Business checking accounts are available to both new and existing companies. Banks often charge a monthly or yearly fee for their business clientele, however many will waive these charges for up to two years for new clients and startups.

Similar to individual bank accounts, business checking accounts allow for deposits, withdrawals, debit card transactions, and overdraft protection. However, most financial institutions will assess a fee for each business transaction you conduct, including cash deposits, cheque issuance, savings, direct debits, standing orders, and wire transfers.

Using overdraft protections to save…

Imagine who you could be, then aim single-mindedly at that. Jordan Peterson

With overdraft protection, your bank or credit union will not be able to charge you any penalties for being overdrawn on your checking account. Overdraft costs may cost anywhere from £20 to £40, depending on the financial institution. More than £25 billion has been collected in overdraft fees in recent years by large banks, local community banks, and credit unions.

The phrase “overdraft” strikes fear into the hearts of most people, and banks are aware of this. So they came up with overdraft protection, which, on paper, seems like it may be useful. The banks rely on the fact that you will believe they have your best interests at heart.

However, overdraft insurance is just as much of a con as overdraft fees themselves. Banks would not have to impose overdraft fees if they always declined transactions at the register or ATM if there were not enough funds in the account to cover the purchase. Furthermore, there would be no need for overdraft protection if banks did not impose overdraft fees.

Banks cannot enrol you in overdraft protection without your express consent. More than half of customers with overdraft protection do not even recall agreeing to it when they opened their accounts. In fact, 75% of consumers would prefer to have their bank reject the transaction outright than risk being paid a fee after the fact.

The most popular forms of overdraft protection for your money are discussed below.

Overdraft protection methods

A fee is often charged each time your bank provides emergency funds to prevent a negative balance in your checking account when you have overdraft protection. Overdraft protection comes in two major varieties. (And do not think the bank may enrol you in overdraft protection without your knowledge or consent. Avoid doing that!)

The first step is to link your checking and savings (Monzo v. Starling review) accounts.

It is not a terrible idea to link your checking and savings accounts. It is a breeze to send money using this method. However, you should definitely not link them together for overdraft protection.

What happens is this: Your bank will first link your checking and savings accounts. Then, if you go overdrawn on your checking account, your savings account will be credited to cover the shortfall.

The fact that most banks charge a fee for this service probably does not come as a huge shock to you. Yes, the transfer of funds from one account to another will cost you anywhere from £10 to £15.

Banks also bet on the fact that customers without sufficient pounds in their checking accounts would not have enough savings to cover any unexpected expenses. The initial overdraft fees may be implemented without further ado.

Add a credit line to your bank account

Banks will happily link your checking account to your credit card if you still use them. Using one of their own credit cards is even better! (But let us be realistic: if you are still using credit cards, you should probably buy some shears and sever those ties once and for all.)

In the event of a checking account overdraft, the excess money is charged to the user's credit card. The bank will, indeed, assess a price for this service. Your bank has not only let you spend money you do not have; it has also placed that money in an interest-bearing account. That is not the kind of help you need!

The main conclusion is that you want to stay away from having to choose one of these alternatives. Repeatedly overdrawing your account will result in you losing money to service charges.

You should truly evaluate the way you have been handling money. If you want to be successful with money, you need a budget, which is a strategy for your finances. As with most things, practice makes perfect. Overdraft charges can eventually be eliminated permanently.

Leading business account with overdrafts for small businesses: The Verdict 

Is an overdraft account the best option for small businesses to get a loan? 

Business overdrafts may be a smart option to borrow money, but only if the conditions and interest rates are favourable. After factoring in fees and interest, an unsecured business loan or business credit card is likely to be the more cost-effective option.

Overdrafts for businesses are similar to personal overdrafts in that they should not be used often but are helpful to have if unexpected expenses arise.

When applying, take extra precautions and ensure you fully comprehend all associated costs and fees (especially those associated with exceeding your credit limit).

Remember that self-awareness is crucial.

Related Guides:

FAQs

Can I get an overdraft business checking account?

Where can I get a corporate overdraft?

How much does it cost for a company to have an overdraft on their bank account?

When I request a business overdraft, is a credit check carried out?

Who can benefit from an overdraft business bank account?

What are the other options for an overdraft for a company?

What happens if my application for a business overdraft is denied?

What info is needed to apply for a business overdraft?

If I have a company loan, can I also have an overdraft?

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Mentioned Banks

About Bank of Scotland Bank of Scotland is a commercial clearing bank based in Edinburgh. Not to be confused with Royal Bank of Scotland, it was established in 1695 and is one...
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About Barclays Bank Barclays is a British multinational investment bank and financial services company. It was founded in 1690 and is headquartered in London. Barclays originated...
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About Cater Allen Cater Allen is a UK-based private bank based and operating in the UK. It is a subsidiary of Santander. The bank that became Cater Allen was founded in Blackburn...
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About The Co-operative Bank Based in Manchester, United Kingdom, the Co-operative Bank is a large retail and commercial bank. It is the seventh biggest lender in Britain and the majority...
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About HSBC Bank HSBC is a British banking and financial services company. It is the largest bank in Europe and the seventh largest bank in the world. The bank originated in Hong Kong...
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About Lloyds Bank Lloyds Bank is a British retail and commercial bank. One of the ‘Big Four’ clearing banks, it was founded in Birmingham in 1765. It is the largest retail bank...
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About Metro Bank Metro Bank is a retail bank based in the United Kingdom. Founded in 2010 by Vernon Hill and Anthony Thomson, it is the first new high street bank to open in the...
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NatWest, or National Westminster, is a retail and commercial bank based in the United Kingdom. It is one of the ‘Big Four’ UK clearing banks and has more than 7.5million personal banking...
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About RBS RBS, or Royal Bank of Scotland, is a retail banking subsidiary of the Royal Bank of Scotland Group. The Group’s other retail subsidiaries are NatWest and Ulster Bank....
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About Santander Santander UK is a British bank. Though it is a British company and autonomously managed, it is entirely owned by the Spanish Santander Group. Santander is one...
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About TSB TSB is a UK-based retail and commercial bank. It is a subsidiary of the Sabadell Group. The TSB we know today came to be in 2013, formed from Lloyds TSB Scotland PLC...
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About Ulster Bank Ulster Bank is one of the ‘Big Four’ Irish banks and is registered in both Northern Ireland (as Ulster Bank Limited) and the Republic of Ireland (as Ulster...
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