Business overdrafts for New Zealand trading accounts.

A business overdraft is a pre-approved limit on the business trading account that allows the balance to go negative up to that limit. It is the traditional major-bank cash-flow buffer. Interest is charged only on the negative balance.

ANZ, ASB, BNZ, Westpac, and Kiwibank all offer business overdrafts. Alternative lenders typically do not because the product requires the lender to also provide the trading account. Heartland Bank has limited overdraft offerings; their working-capital product Heartland Extend is structured more like a line of credit.

NZ business overdrafts commonly run $5K to $500K, with larger amounts available on commercial relationships. Under $150K is typically unsecured (director PG); larger amounts often require property security. The achievable limit depends on monthly turnover, trading history, and the bank's relationship view.

Indicative business overdraft rates run 10% to 16% per annum. Property-secured overdrafts price at the lower end; unsecured smaller overdrafts at the higher end. Rates are commonly variable; they reprice as the lender's base rate moves with the OCR.

Common fees include an establishment fee, an annual review fee (typically $250 to $1,000 depending on size), and sometimes a non-utilisation fee on undrawn limits. The loan contract is the authoritative reference; review fees are typically the largest recurring overdraft cost.

Major banks review business overdrafts annually. The review reassesses the limit against current trading performance and may continue, increase, decrease, or recall the facility. A review fee applies. Annual reviews are typically straightforward for established borrowers with stable trading.

Yes, business overdrafts are typically "on demand" facilities, meaning the bank can recall the limit subject to notice provisions in the contract. In practice, recall is uncommon outside of materially deteriorated trading or covenant breaches. Borrowers are generally given notice and time to repay or refinance.

Interest on a business overdraft used for business purposes is generally deductible against business income, subject to the accountant's confirmation. Where the overdraft funds personal expenses, the deduction is apportioned. Mixed-use overdrafts on sole-trader accounts can occasionally trigger CCCFA on the consumer-credit portion.

An overdraft is attached to the trading account; a line of credit is a separate facility. Mechanically similar (interest on drawn/negative balance, draw and redraw), the difference is institutional. Major banks offer overdrafts; alternative lenders offer lines of credit. For most borrowers the choice depends on which institution is providing the trading account.

Major-bank overdrafts typically take 1 to 2 weeks for an unsecured facility under $150K. Property-secured overdrafts at higher amounts run 2 to 6 weeks because of valuation and credit-committee process. Online overdraft applications via existing relationships can sometimes complete same-day.

Major banks typically require 12+ months trading history with consistent turnover before approving a business overdraft. New businesses may struggle to access major-bank overdraft products in their first year; alternative-lender lines of credit or short-term unsecured loans are typically more accessible at that stage.

Exceeding the approved overdraft limit triggers higher unauthorised-overdraft interest rates (commonly 15% to 25% per annum) and dishonour fees on declined transactions. Banks generally contact the borrower; persistent excess can trigger formal default. Staying under the approved limit is the standard discipline.