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- Free day-to-day online business banking*
- Designed for businesses with a turnover of less than £1million
- Earn 0.25% Cashback on debit card purchases. Terms and exclusions apply
14 Products Compared
Monzo Business Lite-
Monthly Fee:Free
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Monthly Fee Offer:Ongoing
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Bank Transfers:Free
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Overdraft:Yes
- For sole traders and small businesses wanting a free, simple digital current account
- Get instant notifications for all account activity to stay in control of your cash flow
- Online account management only, no phone or branch access.
- Not currently available for charities or partnerships.
- Free, instant UK bank transfers
- 24/7 customer support
- Mobile and web access
- The Monzo banking essentials
- Only sole traders or limited company directors in the UK can apply. Ts&Cs apply.
HSBC UK Small Business Banking Account-
Monthly Fee:£0
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Monthly Fee Offer:None
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Bank Transfers:Free*
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Overdraft:Yes
- No monthly account fee and free UK digital banking*
- Comprehensive features: A full range of business banking services.
- *Free UK digital banking means day-to-day standard electronic transfers made through Business Internet Banking and HSBC UK Business Banking app are free. Other charges apply e.g. cheques and CHAPS. See Business Price List for details. Subject to application, eligibility, credit check and T&Cs.
- **You must be an HSBC Business Banking customer to access free accounting tools through My Business Finance. Once you’ve opened your account, you’ll need to set up Business Internet Banking to get access. This is not available for HSBC Kinetic customers. T&Cs apply. Find out more here.
- No monthly account fee and free UK digital banking*
- Free accounting tools to stay on top of invoices, cashflow and tax.**
- A full list of prices and charges applicable can be found in HSBC UK’s Business Price List at business.hsbc.uk/legal
- Sole traders, limited companies, partnerships, limited liability partnerships and non-charitable clubs/associations/societies can all apply
- Must be a tax resident in the UK but not the Channel Islands or the Isle of Man
- Available to Small Business Banking customers who are typically small enterprises with borrowing needs of up to £100k and whose everyday banking needs don’t need the support of a Relationship Manager. Please note, government lending schemes are subject to different limits.
- Borrowing is subject to application, eligibility, affordability and credit check. T&Cs, fees, charges and rates apply. For loans, you don’t need to open or maintain an HSBC Business Current Account unless a debenture or fixed charge over book and other debts is required.
Lloyds Bank Business Account For Start Ups-
Monthly Fee:£8.50
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Monthly Fee Offer:12 Months Free
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Bank Transfers:100 electronic payments out free per month***
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Overdraft:Yes
- Full access; online, via the app, phone, or at a branch.
- No monthly fee for 12 months if its your first Lloyds Business Account.
- £8.50 monthly fee after 12 months. Some transaction fees still apply.
- You must have a turnover of less than £25m.
- Digital banking with no account fee for 12 months*
- Free invoicing and accounting software available to business account holders. T&Cs Apply**
- Bank in whatever way suits your business – online, with our mobile app, over the phone or in branch
- Support from our UK-based relationship team
- To qualify for this account you need to be a sole trader, partner or company director
- You must have a turnover of less than £25m
- Must be 18 years old or over
- Must not already have a Lloyds Bank business account for this business
- Overdraft: Debit interest is charged monthly and monthly usage or annual fees will apply depending on your credit limit. Where you exceed your Overdraft limit, unauthorised interest and charges will apply
- All lending is subject to status. Security may be required. A guarantee may be required for Limited Companies and Limited Liability Partnerships
Airwallex Explore Business Account-
Monthly Fee:Free*
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Monthly Fee Offer:Ongoing
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Bank Transfers:Free
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Overdraft:No
- Open local currency accounts in 60+ countries
- Make international transfers to 150+ countries at interbank rates
- Deposit £10,000 p/month or hold £10,000 to be free, if not £19 p/month
- An e-money product with no branch access
- Open multiple accounts per entity. Collect and hold in 20+ currencies
- Expense management for cards and reimbursements
- Free local transfers to 120+ countries and domestic transfers. Access to interbank FX rates and batch transfers
- Multi-currency and employee cards with zero international fees
- Includes 5 free employee card users and up to 10 company cards
- Online card and local payment method acceptance globally
- Bank feeds sync with Xero. ApprovalMax, WorkflowMax by BlueRock Integrations
- You must be at least 18 years old
- Be a sole trader, partner in a partnership, or company
- Your business is registered in the UK. More markets are available with different Airwallex entities. Details can be found on the Airwallex website.
Barclays Start-up Business Bank Account-
Monthly Fee:£8.50
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Monthly Fee Offer:12 months free
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Bank Transfers:Free
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Overdraft:Yes
- Free digital banking and no monthly account fee for the first 12 months*
- Access to discounted services via key partners, worth over £5,000**
- After 12 months, the monthly account fee is £8.50 per month*
- **T&Cs apply to each partner service, see partner website for details.
- No monthly account fee* plus access to discounted services via key partners to help you set up and run your business effectively, worth over £5,000**
- A UK-based team of business managers to help you manage and grow your business
- Simple and secure online banking with group payments and cash collection booking tools
- Businesses with existing Barclays business current accounts aren’t eligible for this offer. After 12 months, you’ll pay £8.50 per month. Fees and charges will apply in line with the business account tariff which may be subject to change.
- Must be over 18, a UK resident and a sole trader or the director of a limited company
- Overdrafts are subject to application, financial circumstances and borrowing history.
Virgin Money M Account for Business-
Monthly Fee:Free
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Monthly Fee Offer:Ongoing
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Bank Transfers:Free
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Overdraft:Yes
- Free online business banking (excluding CHAPS & international)
- 0.25% cashback on debit card purchases. Terms apply
- For businesses with less than £1m annual turnover
- Virgin Money offers 24/7 self-service but not 24/7 customer support
- Free day-to-day online business banking (excluding CHAPS and international payments)
- Earn 0.25% Cashback on debit card purchases. Terms and exclusions apply
- Manage all your business data in one place using Virgin Money’s M-Track insights platform. Link up your business to market leading tools, such as Sage, Xero, Google, Shopify and more, to track them from one simple dashboard
- Available for eligible businesses with up to £1m annual turnover
- Must be based and operated in the UK (excluding Channel Islands, Isle of Man and Northern Ireland)
- All owners, directors, senior managers and account signatories must be over 18 years old
- For limited companies, please allow up to 72 hours from registering your business with Companies House, before starting an application
The Co-operative Business Bank Account-
Monthly Fee:Free
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Monthly Fee Offer:Ongoing
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Bank Transfers:Free
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Overdraft:Yes
- Ideal for start ups and growing businesses who bank digitally
- No charges for all automated credits, cash withdrawals and debit card purchases
- Charges apply for cash and cheque transactions
- An overdraft arrangement fee applies and where security is required, additional security fees may apply
- Free everyday digital business banking. No monthly fee. No charges for all automated credits, cash withdrawals and debit card purchases
- Integrate your accountancy software like Xero, Sage or Quickbooks within your online banking
- Online and in-person banking including mobile, instant secure messaging, UK based contact centre, and in branch. Rated ‘Excellent’ based on over 12,000 reviews on Trustpilot
- Most receive their account details within three days
- Co-operative Bank business customers get free, unlimited access to the Go Get Paid app – the fast, simple, secure way to get paid. Plus access selected Clover payment terminals for £1 a month for the first 12 months (fees apply)
- The original ethical bank with a customer-led Ethical Policy
- Must be a UK resident with a business address in the UK
- Must be 18 or over
- You or your organisation must be one of the following: “a Sole Trader, Partnership, Limited Liability Partnership or Limited Company
How to Compare Business Bank Accounts
Understand Your Requirements
How you do business will affect the type of account you need. How many transactions will you have each month? Do you need to pay in cash? Do you need a local branch?
Check Eligibility
Most providers have a range of business accounts to suit different types of businesses. Check the eligibility of each account to make sure if suited to your business.
Compare The Latest Deals
There are numerous offers and deals to attract new customers which can be compared with our handy tool above. Always consider the cost of the account once the free period ends.
Understanding Business Bank Account Overdrafts
A business overdraft is a form of flexible borrowing linked directly to your business bank account. It acts as a financial safety net, allowing you to spend more money than you have in your account, up to a pre-agreed limit. It’s designed for short-term borrowing to help manage cash flow, covering temporary shortfalls when outgoings and income don’t perfectly align.
Unlike a traditional loan, where you receive a lump sum and repay it over a set period, an overdraft is a revolving line of credit. You can dip into it as and when needed, and you only pay interest on the funds you actually use. Once you have funds coming back into your account, your overdraft balance reduces, and the interest charges decrease accordingly. For many businesses, it’s an essential tool for maintaining financial stability.
Arranged vs. Unarranged Overdrafts
It’s crucial to understand the difference between the two types of overdrafts:
- Arranged Overdraft: This is a facility that you apply for and agree with your bank in advance. The bank assesses your business’s financial health and offers you a specific overdraft limit with a set interest rate and clear fees. This is the most cost-effective way to borrow using an overdraft.
- Unarranged Overdraft: This occurs when you spend more money than is in your account without having a facility in place, or if you exceed your arranged limit. Borrowing in this way is significantly more expensive, with much higher interest rates and additional fees, and should be avoided wherever possible.
Key Benefits of a Business Overdraft
A well-managed overdraft offers several significant advantages for a business.
Smooth Cash Flow Management
This is the primary benefit. Nearly every business experiences peaks and troughs in its cash flow. An overdraft can bridge the gap between paying suppliers or staff and receiving payment from clients, ensuring that essential bills are always covered on time.
Flexibility and Control
You only borrow what you need, when you need it. If you have a £5,000 overdraft facility but only need to use £500 for a few days, you only pay interest on that £500 for that short period. This gives you much greater control over your borrowing costs compared to taking out a fixed loan.
Seizing Opportunities
A sudden opportunity might arise, such as a chance to buy stock at a discount or invest in a piece of equipment that will improve efficiency. An overdraft provides instant access to funds, allowing you to act quickly without the lengthy application process of a standard business loan.
How to Apply for a Business Overdraft
The process for securing an overdraft usually involves an application to your business bank. The bank will assess the risk and decide whether to offer you a facility, and how large it should be. They will typically look at:
- Trading History: Most banks prefer to see a solid trading history, often for at least 12 months, to demonstrate consistent income.
- Business Accounts: You will need to provide up-to-date accounts showing the financial performance and health of your business.
- Credit History: The bank will run a credit check on the business. For sole traders and small limited companies, they will often check the personal credit histories of the owners or directors as well.
- Business Plan: For newer businesses, a strong business plan with clear financial forecasts can support your application.
What to Compare When Choosing
Not all overdrafts are created equal. It’s important to compare:
- Interest Rate (EAR): The Equivalent Annual Rate shows you the interest you’ll pay over a year.
- Arrangement Fee: A one-off fee for setting up the overdraft facility.
Renewal Fee: Many banks charge an annual fee to keep the facility active.
Business Bank Account with Overdraft FAQs
1. What is the main difference between a business overdraft and a loan?
An overdraft is a flexible, revolving credit facility for short-term cash flow needs, where you only pay interest on the funds you use. A business loan provides a fixed lump sum of cash that you repay in regular instalments over a set term, making it better for long-term investments like purchasing major assets.
2. Can a new startup get a business overdraft?
It can be challenging for a brand-new startup to secure an overdraft, as banks typically want to see a proven trading history to assess risk. However, some banks offer specific startup packages that may include a small, initial overdraft facility, often dependent on a strong business plan.
3. Will using a business overdraft affect my credit score?
Yes, it can. A business overdraft is a line of credit that will appear on your business credit report. If you manage it responsibly—staying within your limit and making regular payments into your account—it can demonstrate good financial management and potentially improve your credit score. However, frequently exceeding your limit or relying on it constantly can have a negative impact.
4. Are business overdrafts secured against property?
Most business overdrafts, especially smaller facilities for sole traders and small businesses, are unsecured. This means you don’t have to provide property or assets as collateral. However, for very large overdraft facilities, the bank may require a form of security or a personal guarantee from the company directors.
5. How is the interest on an overdraft calculated?
Interest on a business overdraft is typically calculated daily based on the amount you are overdrawn by at the end of each day. The total interest is then usually charged to your account monthly. This is why the cost goes down as soon as you deposit funds to reduce the overdrawn balance.