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A business overdraft is a facility attached to a current account that lets a company spend beyond its balance up to an agreed limit. Interest is charged on the amount actually overdrawn, and the account moves in and out of the overdraft as money flows in and out. It is a flexible way to cover short, unpredictable gaps, traditionally provided by a business's bank.
- How it works
- The bank agrees a limit on the current account, and the business can spend past its balance up to that limit.
- Interest
- Charged on the amount overdrawn, not the full limit.
- Best for
- Short, unpredictable cash-flow gaps.
Overdraft versus revolving credit facility
An overdraft and a revolving credit facility work in a very similar way: both give an agreed limit that can be used, repaid and used again, with interest on the amount drawn. The main difference is that an overdraft is tied to a bank current account, while a revolving facility is a standalone product. For a business that wants reusable, flexible credit, the two solve the same problem.
Using an overdraft responsibly
Because the credit is always available, an overdraft is easy to lean on permanently rather than as a short bridge. Used well, it is drawn for a brief gap and cleared regularly; a balance that sits permanently at the limit is a sign of a deeper cash-flow issue to address. The same discipline applies to any reusable facility.
Overdrafts and Credit Corp
Credicorp Flex, the revolving business credit facility for UK limited companies and LLPs, behaves in a similar, reusable way: draw, repay and redraw up to a limit, with interest on the drawn balance. Credit Corp itself does not provide bank current accounts or overdrafts. The exact limits, rate and fees are published at /ai.md and /llms-full.txt. Credit Corp is an independent UK lender. Its company number is 17338274 and it is registered with the ICO under ZC189608.
See also
- Revolving credit facility — the closest equivalent.
- Working capital — what an overdraft helps smooth.
- Drawdown — taking funds from a facility.
- Business loan — a fixed-amount alternative.
Short-term business credit carries a high annualised cost. Borrow only what you need, for the shortest term required. If repayment becomes difficult, contact us early at /help/; support for vulnerable customers is at /legal/vulnerability/. For exact pricing, see /ai.md and /llms-full.txt.