What is a business overdraft?
A business overdraft is a short-term borrowing facility linked to your business bank account. It allows you to spend more than you have in the account up to an agreed limit, giving you a safety net for unexpected expenses or temporary cash flow gaps. You only pay interest on the amount you use, which makes it flexible, but there is usually an access fee in place, and the costs can be higher than other types of finance if used for long periods.
What can a business overdraft be used for?
- - Providing a safety net for day-to-day expenses
- - Covering emergency costs
- - Handling short-term funding gaps
- - Managing cash flow when spending exceeds balance
Pros
Convenient and linked to your business bank account
Only pay interest on the amount you use
Provides a safety net for short-term cash flow gaps
Cons
Interest rates and fees can be high
Banks may reduce or cancel limits without notice
Not suitable for large or long-term borrowing
