How a business overdraft works
An arranged business overdraft lets your current account go below zero up to an agreed limit. Interest is normally charged on the amount you use, not the full facility — but arrangement, renewal and account fees can still add cost.
Limits and rates are subject to provider assessment and can be reviewed, reduced or withdrawn under the facility terms.
- Interest usually applies only while you are overdrawn
- Fees can matter as much as the published EAR
- Many facilities require a provider business account
EAR, fees and total cost
Representative EAR helps you compare annualised overdraft interest. It typically excludes separate arrangement, renewal or security fees — so always read the fee schedule alongside the rate.
Compare [business overdraft providers](/business-finance/overdrafts) by published EAR, facility size, fees, account rules and security or personal-guarantee wording.
When an overdraft may fit
Overdrafts often suit short, fluctuating cashflow gaps. If you need a fixed sum for investment, equipment or growth, a term loan, asset finance or invoice finance may be a clearer match.