No overdraft?
Five ways to cover the same gap
The main alternatives to a business overdraft are a revolving credit line from a specialist lender, invoice finance if you sell on credit terms, revenue-based finance if you take card payments, a short-term loan for one known gap, and a business credit card for small spending you clear each month. The credit line is the closest like-for-like swap: a limit you draw on and pay for only while you use it.
No credit check to enquire.
What each one does that an overdraft did
- A credit line: the nearest replacement
A limit that waits until you need it and refills as you repay. Unlike an overdraft it is not tied to your current account and, on the facility we place most often, is not repayable on demand. How it works.
- Invoice finance: an overdraft that grows with sales
If the overdraft was really funding the wait for customers to pay, this does that job directly and the limit rises as your ledger does. How it works.
- Revenue-based finance: for card-heavy trade
A lump sum repaid as a share of card takings, so it takes less in a quiet week, much as an overdraft balance would drift with trade. Dearer per pound.
- A short-term loan: for one gap you can see
A fixed sum over a few months, for a known shortfall with a known end. Less flexible, but certain.
- A business credit card: for small, quick spending
Interest-free if cleared in full each month, and useful for travel, software and small suppliers. Expensive as a way to carry a balance.
How each one compares with an overdraft
Two tests an overdraft passes that some replacements do not: whether it can vanish at short notice, and whether the same limit works a second time.
General features. The terms of any facility you are offered are what count, and we confirm them for the specific lender rather than promising them in general.
Why the overdraft went, and whether that matters
An overdraft is a facility on your current account that the bank can reduce or call in, usually with little notice. Banks review them regularly, and a reduced limit is a common outcome of a review after a weak year, a change in the bank’s own appetite, or a new account that never had one. It is rarely personal and rarely negotiable.
The awkward part is that an overdraft is tied to the account. Another bank will not usually give you one without you moving your banking to it, which is a project in itself. That is a large part of why specialist credit lines have grown: they sit alongside whichever bank you already use.
Choosing the right replacement
Ask what the overdraft was actually doing. If it was carrying you from invoice to payment, invoice finance or a credit line replaces it properly. If it covered the odd lumpy bill, a credit line does it better, because you pay for the weeks rather than a standing arrangement. If it was permanently drawn to the limit, it was really a loan, and a term loan will be cheaper and more honest about it.
Then compare in pounds. An overdraft is priced as an annual rate plus an arrangement or renewal fee; a credit line may be a fee per drawdown; revenue-based finance is a factor rate. None of those compare by eye. Work out what each would cost for the way you actually use the money. A year of a credit line, priced.
Keeping some of both
If your bank still offers a smaller overdraft, keeping it alongside a credit line is sensible: the overdraft for day-to-day wobbles, the credit line for the larger gaps. Tell any new lender about the overdraft, because they will see it on the statements and ask anyway.
Lost your overdraft? Tell us what it was covering and we will find the closest replacement.
Get my optionsCommon questions
What is the closest thing to an overdraft that is not from a bank?
A revolving credit line. You get a limit, draw when you need to, repay and draw again, and you pay only for what you use. It sits alongside your existing bank account rather than inside it.
Can I get an overdraft from a bank I do not bank with?
Rarely. An overdraft is a feature of a current account, so a new bank will normally want you to move your account, and often your other banking, before it offers one. A credit line avoids that.
Is a business credit card a good replacement for an overdraft?
For small spending you clear every month, yes, and it can be interest-free if repaid in full. For carrying a balance from one month to the next it is usually one of the dearer ways to borrow.
Why did my bank reduce my overdraft?
Usually after a review: weaker accounts, a busier account than before, a change in the bank’s own lending policy, or simply because the facility came up for renewal. Ask the bank for the reason; it will tell you what another lender is likely to look at too.
Will replacing my overdraft affect my credit file?
Enquiring with us does not. A formal application to a lender may involve a credit search, which we tell you about before it happens. Running two facilities is fine as long as the repayments are affordable on your statements.
Find your overdraft replacement
About a minute, no credit check, and the options that fit the way you used it.
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