What is a Business Overdraft?

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  • Written By: S. Gonzales
  • Edited By: A. Joseph
  • Last Modified Date: 10 October 2019
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A business overdraft is a source of short-term cash for business owners. It usually is associated with a business owner's checking account. Business owners can access overdraft funds after their account balances have reached zero. Overdrafts allow business owners to keep cash flowing in and out of their businesses even though they might not have the funds in their accounts. Overdrafts are always expected to be paid back, but repayment options can be fair.

Business overdraft services are suited to business owners who have trouble getting paid by their clients or who experience significant changes in revenues during different times of the year. They also are particularly beneficial to business owners who want a backup plan for any unexpected costs that might arise while running their businesses. Overdraft services also can help business owners fund new ventures or other opportunities that can arise.

Many banks offer business overdraft services for business customers who hold checking accounts. The features of these services can vary between banks, but many banks allow their business customers to continue to access funds after an account balance has reached zero. Some banks can have standard amount limits set regarding overdraft privileges, but others might approach their business customers individually and come to an agreement on a limit.


There can be a specified time period within which business customers are expected to pay back overdrafts. Some banks, however, don't require business customers to pay back the overdraft amount within a specific time frame. Instead, they allow customers to repay the amount at their convenience, and they charge interest on the amount as long as there is money owed.

An advantage of using a business overdraft at a bank is the potentially low interest rate. Overall, business overdrafts can cost less money than overdraft activity that can take place on a business credit card. With a little research, account holders who choose to take advantage of a business overdraft service can find more ways to reduce their interest costs. Some banks will lower interest if a business account holder offers a piece of collateral, such as a residential property.

There are several ways that a business owner can access funds from a business overdraft. The owner can transfer money online or over the telephone, write a check or withdraw the money from an automated teller machine (ATM) or at the bank. The particular sources of overdraft money can vary between banks, but many offer overdraft money in a convenient and accessible manner. Commonly, overdraft money is available to business owners 24 hours a day, seven days a week.


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