Overdrafts

A line of credit your bank provides when you need to withdraw more money than you have available.

An overdraft is a line of credit on your business bank account that gives you more short-term cashflow than your business can fund from its own capital.

Where a business loan comes with fixed repayments and interest, an overdraft charges interest only on the amount by which you’re overdrawn. You can pay back an overdraft as and when your cashflow allows, although your bank can demand repayment at any time. It may also charge a fee for the overdraft.

You can increase or reduce your overdraft limit (depending on what your business needs), providing your bank approves this.

Setting up a business overdraft is straightforward, and is something you arrange with your bank. Depending on the options your bank provides, you can typically arrange an overdraft online, over the phone or in branch.

High rate of approval

Typically, your business will be able to arrange an overdraft without any issue.

Quick to arrange

The process of getting a business overdraft is very straightforward and is simply a matter of discussing your needs with your bank.

Pay off your debt as and when your cashflow allows

On some occasions, your bank might demand repayment, but usually you'll be able to repay what you've borrowed when you have the available funds to do so.

Charges

If you're late with a repayment or miss it altogether, your bank might charge you a fee. This can also affect your credit report.

High interest rates

Overdrafts generally have higher interest rates than business loans and other forms of borrowing.

Repayable on demand

With some overdrafts, you do have to repay them whenever your bank demands, rather than waiting until you can afford to do so.

Interest rates

Overdrafts aren’t free and you’ll pay an annual interest rate on the amount by which you’re overdrawn. This rate varies between banks.

Typically, rates for overdrafts are higher than for business loans. They can also change at any time. As a result, overdrafts are generally considered short-term solutions.

Fees

As well as interest rates, you may also be charged the following:

  • Arrangement fee – for setting up the overdraft
  • Renewal fee – often charged each year when you come to renew the facility
  • Change fee – for changing (usually increasing) your overdraft limit
  • Unarranged overdraft fee – if you go over your overdraft limit

Bank Referral Scheme

If your business has been unsuccessful in applying for finance from some of the UK's major banks, this scheme could be able to help you find finance elsewhere.

If the scheme doesn't work for you, the participating banks must, by law, offer you a referral to another finance platform.

 

Other finance options

Click here to visit Angel Investment
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Angel Investors act as mentors and invest their own money in early-stage businesses for a share in the company.

Angel Investment

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Early-stage businesses with a turnover of less than £5m. They invest in any sector but like businesses with a scalable business proposition.

You're looking for

Between £15,000 and £500,000 within two to six months from a single Angel for working capital, product development, entry into new markets, to build teams or increase sales. Large Syndicates may offer up to £2m.

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Angel Investment
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Angel Investment
Purpose of financessss Working capital, product development, entry into new markets, build teams, increase sales
Amount of finance Usually £15k-£500k, but large Syndicates may offer up to £2m
Duration of finance Typically 3-8 years
Cost of finance None
Time of finance 2-6 months
About your business
Business stage Generally early stage, pre-revenue or pre-profit
Annual turnover Less than £5m
Sectors All sectors, but especially suitable for companies with a scalable business proposition
Regions All regions
Click here to visit Peer-to-Peer Lending
Debt
A business borrows money through an online platform and pays it back with interest over an agreed period.

Peer-to-Peer Lending

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Businesses with a trading history that meet the eligibility criteria of the platform you choose.

You're looking to

Get a loan quickly and maintain full control of your business.

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Peer-to-Peer Lending
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
About your business
Business stage Established with a trading history
Annual turnover Any
Sectors Any
Regions Any
Click here to visit Direct Lending Fund
Debt
A business borrows money from a fund and repays it with interest. A fund may be able to provide loans where a bank will not.

Direct Lending Fund

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Businesses with assets to use as security against lending.

You're looking to

Flexible and tailored loans and to maintain full control of your business.

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Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
About your business
Business stage Established with assets and a trading history
Annual turnover Any
Sectors Any
Regions Any

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