Business Overdraft Cost Calculator

Understand the true cost of your business overdraft or revolving credit facility. Enter your facility limit, average utilisation, EAR, and any arrangement fees to see monthly interest, annual cost, and effective APR.

Overdraft / credit line limit (£)

Average utilisation (%)

Average % of the limit actually drawn

EAR — Equivalent Annual Rate (%)

Annual arrangement fee (£)

Leave blank if no arrangement fee

Note:EAR assumes daily compounding on the drawn balance. Actual charges depend on your bank's specific terms. Business overdraft rates typically range from 8%–25% EAR. Some banks also charge an unused facility fee on the undrawn portion.

Understanding Business Overdraft Costs

A business overdraft is a flexible revolving facility — you only pay interest on the amount drawn. However, the combination of a high EAR and a regular arrangement fee can make overdrafts expensive compared to term loans for predictable borrowing needs.

Key Terms

EAR (Equivalent Annual Rate): The annual interest rate assuming you are continuously drawn on the facility. Does not include fees — use effective APR to compare total cost.
Arrangement fee: An annual (or one-off) fee charged by the bank for maintaining the facility. Often 0.5%–2% of the limit.
Utilisation: The average percentage of the limit you actually use. A 100% utilised overdraft costs far more than one used at 30%.
Effective APR: Total annual cost (interest + fees) expressed as a percentage of the facility limit — a better comparison metric.

Overdraft vs Term Loan

For short-term working capital gaps, an overdraft is convenient. For capital purchases or longer-term borrowing, a term loan typically has a lower effective rate. Use this calculator alongside the Business Loan Repayment Calculator to compare.