Quick answer
A business overdraft is a bank facility that lets your business transaction account go into a negative balance, up to an approved limit, to cover short-term gaps between paying bills and being paid. Interest applies only to the overdrawn amount, a line fee usually applies to the limit, and the bank reviews it regularly. It can be unsecured for smaller limits or secured by property for larger ones.
Key points
- Attached to a business transaction account, so it works with everyday payments
- Major banks offer unsecured limits up to about $250k for eligible businesses, as at October 2026
- Size the limit from your deepest seasonal trough, not your average month
- A balance that never returns to credit looks like permanent debt to a lender
A business overdraft is an approved negative balance on your business transaction account. Up to the limit the bank sets, wages, supplier payments and the BAS can still go out when the account has nothing in it, and every customer payment that lands brings the balance back towards zero.
For the general mechanics of interest and line fees, see our entry on the overdraft. This page focuses on the business side: what banks want before they say yes, how to pick a limit, and how a lender reads the way you use it.
What do the banks offer right now?
The banks are where most business overdrafts live, and for good reason: tied to your everyday account, they’re usually the simplest and cheapest flexible facility a trading business can have. As at October 2026, their published criteria give a sense of the entry point.
| Bank | Unsecured limit | Notable published criteria |
|---|---|---|
| Westpac | $5k to $250k | At least 12 months trading, turnover over $75k a year, GST registered, a Westpac business transaction account |
| CommBank | $2k to $250k | Registered Australian business; secured version available over residential, rural or commercial property |
Both banks list an establishment fee and a line fee, and director guarantees are common for companies even when no property is involved. Larger limits are generally secured over real estate.
If your bank offers you an overdraft on terms you can live with, it’s worth taking seriously. If it has declined, or capped the limit below what the business needs, our business overdraft loan page and the situation guide on being refused an overdraft increase cover the next steps.
How should you size the limit?
The most common mistake is asking for a limit based on an average month. Overdrafts exist for the trough, so start there.
Pull twelve months of statements and find the lowest daily balance in each month. The deepest of those, plus a margin for a late-paying customer, is roughly the limit you need. Asking for much more means paying a line fee on headroom you never touch; asking for less means bounced payments in your worst week. Our cash flow gap calculator helps estimate the shortfall from your own figures.
What does a lender read into your usage?
A healthy overdraft breathes. The balance dips when bills are due and climbs back as invoices are paid, crossing into credit several times a year. Bankers sometimes call a balance that never clears “hardcore” usage: the limit has quietly become long-term funding.
That pattern matters at review time and when you apply anywhere else. It suggests the business needs a term loan, more working capital or a fix to its pricing, not a revolving facility. Converting the hardcore portion to a term loan often makes the overdraft look healthy again.
Weighing an overdraft against other options? Tell us how your account moves through the year.
An Australian example
A café on the Hobart waterfront turns over about $900k a year, but trade between June and August falls hard while rent, wages and supplier accounts don’t. Last winter the account bottomed out at minus $38k for a fortnight in July.
The owner asks the bank for a $50k unsecured overdraft: the $38k trough plus room for a broken coffee machine or a big catering client paying late. In summer the account sits in credit and the overdraft costs only the line fee; in winter it carries the café through. Because the balance clears every spring, the facility rolls over at review without fuss.
Related terms
See line fee, credit limit, revolving credit and line of credit. For the head-to-head, read overdraft versus line of credit.
Bank limit too tight for your busy season?
A flexible facility should match the shape of your year, and when the bank’s limit doesn’t, a second facility from a non-bank can sit beside it. Our enquiry is a quick, one-minute set of questions. Sending it creates no new enquiry on your credit report. We keep your information in-house rather than spraying it across a long list of financiers, and a specialist rings to talk about your cash flow in plain terms. The more honestly you describe your turnover and your lowest months, the better the first suggestion will fit.
Frequently asked questions
What do banks need to approve a business overdraft?
Typically an ABN or ACN, a business transaction account with that bank, a trading history (Westpac asks for at least 12 months on its unsecured version), turnover figures, financial statements or BAS, and director guarantees for companies. Larger or secured limits need property valuations.
Can a new business get an overdraft?
It's hard with the major banks, which generally want a year or more of trading for an unsecured limit. A secured overdraft over property may be possible earlier. Many new businesses start with a business credit card or a small line of credit instead.
How is a business overdraft different from a business line of credit?
An overdraft is built into your transaction account, so payments draw on it automatically. A line of credit is usually a separate account you transfer from. Non-bank lenders mostly offer lines of credit rather than true overdrafts.
How big should my overdraft limit be?
Work out the lowest point your account reaches in a typical year, add a buffer for a slow-paying customer or an unexpected bill, and ask for that. A limit far bigger than you need costs line fees for no benefit.
What if my bank won't increase my overdraft?
Ask what would change the answer, such as security, updated financials or reduced usage. If the bank still says no, a non-bank line of credit, invoice finance or a short working capital loan can sit alongside the existing overdraft.