Business overdrafts that cover the gap between paying and getting paid.

A business loan advances a fixed amount that you repay over a set term. An overdraft is a limit attached to a transaction account that you draw on and repay as needed, with interest charged only on the balance used. A loan suits a defined purchase or a one-off cost; an overdraft suits timing gaps between paying suppliers and being paid. Overdrafts often carry a line fee whether or not you draw the limit, so compare the total cost of holding the facility.

A business overdraft is attached to your everyday transaction account and is usually offered by your bank, while a business line of credit is a standalone facility that can come from a bank or a non-bank lender. Both are revolving and both charge interest only on what you use. Non-bank lines of credit are typically approved faster from bank statements and are often available without property security, whereas bank overdrafts tend to require more documentation but can be cheaper. Your broker compares the total cost of each, including line fees, before you decide.

A business overdraft lets your transaction account go below zero up to an approved limit, so you can pay wages, suppliers or the ATO before customer payments arrive. Interest is charged daily only on the overdrawn balance, and every deposit into the account reduces what you owe. There is no fixed repayment schedule; the facility is reviewed each year and stays available as long as the account is conducted well. It works as a standing buffer rather than a loan you draw once.

An overdraft usually has two costs: interest on the overdrawn balance, charged daily at a variable rate, and a line fee or facility fee charged on the whole limit whether or not you use it, commonly quoted as an annual percentage of the limit and billed monthly. Some lenders add an establishment fee. Because the line fee applies to the unused limit, a large overdraft you rarely use can cost more than a smaller one you use often, so size the limit to your real gap.

Small overdrafts are often available unsecured, generally up to around $50,000 to $250,000 depending on the lender, with a director’s guarantee. Larger limits are usually secured by residential or commercial property, and some lenders take a general security agreement over the business assets instead. Secured overdrafts carry lower rates and line fees. Your broker explains what each lender requires and what a guarantee or security means for you before you decide.

Lenders set the limit from your trading history, the regularity of deposits into the account, existing debts and, for secured overdrafts, the value of the security. A common rule of thumb is a limit around one to two months of turnover for a well-run business, but it varies. Limits are reviewed at least annually and can be increased as the business grows. Providing 6 to 12 months of business bank statements gives the clearest picture of the gap you are covering.

Yes. Several non-bank lenders in Australia offer overdraft-style facilities that link to your existing business account and approve from bank statements, often within a few business days and without property security. They are usually quicker and simpler than a bank overdraft but tend to cost more, and limits are lower. Banks require more documentation and take longer, but price more sharply and offer larger secured limits. Lyft Money compares both so you see the total cost side by side.

Most lenders look for an active ABN, at least 12 months of trading, regular deposits into a business account and a clean recent conduct history, meaning no dishonours or long periods overdrawn without approval. Sole traders, partnerships, companies and trusts can apply. Businesses with less than a year of trading are usually steered to a line of credit or a short-term loan instead. Lyft Money checks fit across the panel before anything is submitted.

Once a year the lender checks that the business is still trading well and that the account has been conducted within the limit. It may ask for updated financials or bank statements. The limit can be renewed, increased, reduced or, rarely, withdrawn if conduct has been poor. Because an overdraft is technically repayable on demand, keeping the account in good order through the year matters more than with a term loan. Your broker can handle the review paperwork.

Yes. Covering a BAS or PAYG payment, wages or a supplier invoice before customer payments arrive is exactly what an overdraft is for. Lenders expect the balance to swing back into credit regularly, though; an overdraft that sits permanently at its limit signals a longer-term funding need, and a term loan or a structured ATO payment arrangement is usually cheaper for that. Your broker helps you match the facility to the pattern of the gap.