Standard overdraft
Approved limit on existing trading account. Reviewed annually. Interest on negative balance. The default major-bank cash-flow tool.
- Limit: $5K to $500K
- Suits: Established businesses
Loan type
Business overdrafts for New Zealand trading accounts.
The bank-account-attached cash buffer. Approved limit on the trading account, interest only on negative balance, common at the four major banks and Kiwibank.
Last reviewed 5 May 2026
Indicative repayment
Weekly
$618/week
$2,680 /month $2,154 total interest
$30,000
$5,000 $500,000
1 year
6 months 5 years
13.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $30,000 scenario
1 year at 13.00%. Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
Educational
Indicative only. Why we say this
Quick answer
NZ business overdraft basics.
- Trading-account-attached limit added to the existing business bank account; balance can go negative up to the limit.
- Major-bank product ANZ, ASB, BNZ, Westpac, Kiwibank. Alternative lenders typically use line-of-credit instead.
- Indicative 10% to 16% on the negative balance only. Often property-secured at higher amounts.
- Open-ended no fixed term. Reviewed annually and either continued, repriced, or recalled.
What it is
The bank-account-attached cash buffer.
A business overdraft is a pre-approved limit on the trading account that allows the balance to go negative up to that limit. It is the traditional NZ bank-led cash-flow buffer, similar in function to a line of credit but attached to the trading account itself rather than provided as a separate facility.
Mechanically, when the account balance falls below zero, the negative portion accrues interest at the overdraft rate. As deposits come in (customer payments, sales), the negative balance reduces and interest stops accruing on the repaid portion. Unlike a term loan, there is no fixed schedule.
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, which is a banking function not a lending function.
Limit
$5K to $500K+
Access
Open-ended
Interest
On negative balance
Rate band
10% to 16% indicative
Sub-types
Three NZ business overdraft variants.
Temporary excess
Short-term increase to existing overdraft limit for a specific purpose. Common for tax bills, large supplier payments, or one-off cash gaps.
- Term: 30 to 90 days
- Suits: Defined short gaps
Property-secured overdraft
Larger overdraft amounts ($150K+) typically require property security. Lower indicative rate but slower setup process.
- Limit: $150K to $1M+
- Suits: Larger amounts, lower rate
Vs alternatives
Overdraft vs line of credit vs term loan.
| Feature | Overdraft | Line of credit | Term loan |
|---|---|---|---|
| Trading account | Attached | Separate facility | Separate |
| Term | Open-ended | 2 years revolving | Fixed 6-60 mo |
| Indicative rate | 10% to 16% | 12% to 20% | 12% to 25% |
| Provider | Major banks | Alternative + Heartland | All |
| Setup speed | 1 to 2 weeks | 1 to 5 days | 1 to 2 days |
| Suits | Trading-account buffer | Recurring gaps | One-off purposes |
Lenders
NZ business overdraft providers.
Best for broad business overdraft
ANZ Business
Major-bank business overdraft. Established product across all SME segments.
Indicative rate band:10% to 14% p.a.
Read onBest for rural and SME
ASB Business
ASB business overdraft. Strong agribusiness presence in the South Island.
Indicative rate band:10% to 14% p.a.
Read onBest for QuickBiz online product
BNZ Business
BNZ business overdraft alongside the QuickBiz online lending product.
Indicative rate band:10% to 14% p.a.
Read onBest for commercial property combined
Westpac Business
Westpac business overdraft commonly combined with their commercial mortgage product.
Indicative rate band:10% to 14% p.a.
Read onBest for NZ-owned banking
Kiwibank Business
NZ-owned bank with SME-focused overdraft. Smaller-end of the major-bank cluster.
Indicative rate band:10% to 14% p.a.
Read onHow it works
Applying for a NZ business overdraft.
01
Day 1 to 5
Relationship-banker conversation
Initial conversation with the existing relationship banker, or a new bank's business team if shifting trading account. Define limit, purpose, and security on offer.
02
Day 3 to 10
Documentation pack
NZBN, business owner ID, last 6 to 12 months business bank statements, P&L (typically 1 to 2 years on amounts $50K+), cash-flow forecast on larger applications.
Documents commonly required
- NZBN
- Director ID
- 6 to 12 months bank statements
- P&L (1 to 2 years)
- Cash-flow forecast (over $50K)
03
Day 5 to 14
Credit assessment and pricing
Bank credit team assesses against turnover stability, debt-service ratios, and security position. The pricing reflects the limit, security, and trading history.
04
Day 14 onward
Documentation, drawdown, annual review
On approval, facility documents are signed and the limit is added to the trading account. Interest accrues only on negative balance. Annual review fee applies and the limit is reassessed each year.
Major-bank overdrafts on existing relationships under $150K commonly turn around in 1 to 2 weeks. Property-secured overdrafts on larger amounts run 2 to 6 weeks because of valuation and credit-committee process.
Worked scenarios
Three NZ business overdraft scenarios.
Indicative interest costs across three different NZ businesses using overdrafts, illustrating how the cost is governed by the time the account spends in negative balance.
Manufacturing
Hamilton manufacturer, monthly cycle
A Te Awamutu light manufacturer with monthly production runs and 30-day customer payment terms. Wages and supplier payments fall mid-month; customer payments arrive end-of-month. A $80K overdraft limit covers the gap.
Account spends 10 to 15 days per month in negative territory, peaking around -$60K. At 12% indicative on the negative balance, annual overdraft interest runs ~$2,400 plus an annual review fee.
Indicative figures
- Approved limit
- $80,000
- Average negative
- -$30,000
- Indicative rate
- 12% p.a.
- Annual interest
- ~$2,400
- Annual review fee
- ~$500
Agriculture
Christchurch agribusiness, seasonal
A Canterbury arable farm with one main harvest income event in February-March and operating costs spread across the year. A $400K property-secured overdraft funds the working capital cycle.
Account runs progressively negative through winter and spring, peaks around -$300K in January, and is repaid in full as harvest income lands. Property-secured pricing keeps the rate below an unsecured equivalent.
Indicative figures
- Approved limit
- $400,000
- Peak negative
- -$300,000
- Indicative rate
- 10% p.a.
- Annual interest
- ~$15,000
Professional services
Auckland services, payroll smoothing
A central-Auckland law practice running a $30K overdraft as payroll smoothing buffer. Used 5 to 8 days per month around fortnightly payroll runs.
Average negative balance is small (-$10K). Annual interest cost runs under $1,500. The practice values the buffer for predictability rather than sustained drawdown.
Indicative figures
- Approved limit
- $30,000
- Average negative
- -$10,000
- Indicative rate
- 13% p.a.
- Annual interest
- ~$1,300
Trade-offs
Where an overdraft fits, and where it doesn't.
Where it fits
- Established businesses with an existing major-bank relationship and 12+ months consistent trading.
- Trading-account-attached structure where staff can use the buffer without thinking about a separate facility.
- Open-ended access where there is no defined end date for the cash-flow need.
- Larger amounts ($150K+) where major-bank pricing materially beats alternative-lender alternatives.
- Borrowers who value the major-bank brand on counterparty and supplier risk perception.
Where it doesn't
- New businesses without 12+ months trading; major banks rarely approve overdrafts at the startup stage.
- Borrowers who cannot get major-bank approval and need an online alternative; alternative lenders typically use lines of credit instead.
- Time-sensitive needs; overdraft setup runs 1 to 6 weeks vs same-day on alternative lender lines of credit.
- Borrowers wanting flexibility on which institution provides the trading account; overdraft requires the lender to also be the bank.
- One-off lump-sum purchases where amortising term loans price below overdraft rates.
When it goes wrong
Default scenarios on a business overdraft.
Overdraft default scenarios in NZ commonly start with limit excess rather than missed payments. Three common patterns.
Unauthorised excess
Account drops below the approved overdraft limit. Bank may honour or dishonour the transaction depending on the relationship; honoured excess attracts unauthorised-overdraft interest rates (commonly 15% to 25%) and dishonour fees apply on declined transactions.
What happens:Higher interest cost, dishonour fees, and a relationship-banker check-in. Persistent excess triggers a formal review of the facility.
Annual review denial or recall
The annual review reassesses the overdraft against current trading. On materially deteriorated trading or covenant breaches, the bank may decline renewal, reduce the limit, or recall the facility (subject to notice provisions).
What happens:Reduced or removed access to the buffer. Drawn balance must be repaid within the recall notice period (typically 30 to 90 days). Borrowers commonly refinance to an alternative lender at this point.
Formal default and PG enforcement
On formal default of the overdraft balance, the bank pursues recovery through the director PG and any registered security. Property-secured overdrafts can move to mortgagee sale; unsecured overdrafts pursue personal assets under PG.
What happens:Trading account commonly closed. Personal credit file marks. Future major-bank borrowing materially harder; alternative-lender access remains but at higher prices.
Most NZ overdraft problems are caught at annual review rather than at default. Banks typically signal concern in time for the borrower to refinance, restructure, or repay. The annual cycle is the structural backstop.
Indicative pricing by limit
What a New Zealand business overdraft typically costs.
Overdraft pricing has two components and borrowers commonly compare only the first. The interest rate applies to the negative balance; the line fee, sometimes called a facility or commitment fee, applies to the whole approved limit whether or not it is used. On a facility that sits mostly unused, the line fee is the entire cost. The bands below are observed across the five NZ banks that offer business overdrafts as at 2026.
| Approved limit | Indicative rate | Indicative line fee | Typical security | Cost if unused, year |
|---|---|---|---|---|
| $5,000 to $20,000 | 13% to 16% | 1.0% to 2.0% | Director guarantee | $50 to $400 |
| $20,000 to $50,000 | 12% to 15% | 1.0% to 1.75% | Director guarantee, GSA | $200 to $875 |
| $50,000 to $150,000 | 11% to 14% | 0.75% to 1.5% | GSA, often property | $375 to $2,250 |
| $150,000 to $300,000 | 10% to 13% | 0.75% to 1.25% | GSA plus property | $1,125 to $3,750 |
| $300,000 and above | 10% to 12% | 0.5% to 1.0% | Property security typical | $1,500 to $5,000+ |
Indicative bands only, not a quote or offer of credit. GSA is a general security agreement over business assets. Actual pricing, fees and security requirements are set by the bank after assessment and vary materially with trading history and the security offered.
The on-demand clause
An overdraft is repayable on demand, and that is not a formality.
Most New Zealand business overdrafts are written as repayable on demand, which means the bank can require the negative balance to be cleared and the limit withdrawn without the notice period a term loan carries. In practice this is rarely exercised without cause, and the common triggers are a sustained breach of the limit, a material decline in trading, or the bank reducing exposure to a sector. The exposure it creates is worth understanding before an overdraft becomes the structural funding a business depends on, because the facility that disappears is the one the business was using to pay wages. A term loan for the permanent portion and an overdraft for the genuine timing gaps is the structure that removes that risk.
Getting one
Why an overdraft is harder to obtain than the rate suggests.
An overdraft prices below most unsecured alternatives, and the reason it is not the obvious first choice for every business is that the eligibility bar sits higher. The product is offered by the five NZ banks and requires the trading account to sit with the same bank, so obtaining one commonly means moving banking relationships as well as applying for credit.
Trading history is the first gate. Two years of accounts is a common threshold for a meaningful limit, and start-ups are rarely approved for more than a nominal amount. The second gate is security: above roughly $50,000 a general security agreement over business assets is standard, and above roughly $150,000 property security is commonly required.
Turnaround is the third difference. An alternative-lender term loan can be assessed in a day; a bank overdraft application commonly runs one to three weeks including account opening and security registration. A business that needs the room this month is generally looking at the wrong product.
The practical sequence many New Zealand businesses follow is to fund the immediate gap through a faster unsecured facility, then apply for an overdraft against the trading record that facility helped build, and refinance into it once approved. That path costs more in the first year and materially less thereafter.
Common pitfalls
Six things that catch NZ borrowers on an overdraft.
The overdraft is the oldest business credit product in the country and the one most often misused, largely because it is attached to the account rather than experienced as a loan.
The hardcore balance
Where the account never returns to positive, the portion that never clears is termed hardcore in banking language. It is a term debt being serviced at overdraft pricing, and NZ banks review specifically for it.
Unarranged overdraft fees
Going past the approved limit, even briefly, commonly triggers a fee and a materially higher rate on the excess. A single large supplier payment landing before a customer receipt can cost more than a month of ordinary interest.
The line fee on an unused limit
A limit approved and never used still carries its fee. Businesses that arranged a buffer during a difficult period and left it in place afterwards commonly pay for years of room they no longer need.
On-demand repayment
The facility can be called. It rarely is without cause, but a business that has built its working capital on an overdraft is carrying a risk a term loan would not create.
Security creep
Limits above roughly $150,000 commonly attract property security. A modest increase can move the facility from a general security agreement to a mortgage over a home, which is a materially different exposure.
Banking-relationship lock-in
The overdraft sits on the trading account, so moving banks means re-applying for the facility elsewhere and being without it during the transition. That friction is worth pricing in before consolidating banking around it.
Worked example
A Tauranga building supplies merchant smoothing a seasonal trough.
The merchant sells to residential builders and its receipts follow the building season. June through August the account runs down; October through March it is comfortably positive. Stock has to be bought ahead of the season, which puts the largest outgoing in the month with the smallest inflow.
A $150,000 overdraft at an indicative 12% with a 1% line fee covers the trough. Across a full year the account is negative for roughly five months, averaging around $85,000 in those months and sitting positive for the rest.
On these assumptions interest lands near $4,250 across the negative months, and the line fee adds $1,500 on the full limit for the whole year, for roughly $5,750 in total. The merchant reviewed a term loan at an indicative 11% and found that borrowing $150,000 for twelve months to solve a five-month problem would have cost closer to $16,500 in interest on money sitting idle for seven of them.
This is the shape the overdraft is genuinely good at: a predictable, seasonal, self-correcting gap where the account returns to positive without intervention. The moment it stops returning to positive, the same facility becomes an expensive term debt and the structure worth reviewing.
Indicative figures, one season
- Approved limit
- $150,000
- Months negative
- ~5
- Average when negative
- ~$85,000
- Indicative rate
- 12% p.a.
- Interest, indicative
- ~$4,250
- Line fee at 1%
- $1,500
- Total indicative cost
- ~$5,750
Indicative only, based on the assumptions stated above. Interest on an overdraft accrues on the daily negative balance, so the actual figure depends on the timing of receipts and payments across the period.
Structuring it properly
The permanent portion and the fluctuating portion are different problems.
The fluctuating portion
What an overdraft is genuinely good at.
A business with receipts that arrive in lumps and outgoings that arrive weekly has a timing problem, not a funding problem. Across a full year the account is positive more often than not, and the negative periods are self-correcting because the money is already earned and simply has not landed.
That is the shape an overdraft prices for. Interest accrues only on the days the balance is negative, there is no repayment schedule to meet, and the facility costs its line fee and nothing more in the months it is not needed.
The diagnostic is simple enough to run from the bank statements: across the last twelve months, did the account return to positive under its own momentum, without an injection from the owner or a new facility? Where the answer is yes, the overdraft is doing the job it was designed for.
The permanent portion
Where the overdraft is the wrong instrument.
Where the account has not been positive in twelve months, some portion of the balance is not a timing gap at all. It is a permanent funding requirement, most often created by growth, by a loss the business has not yet worked through, or by stock and debtors that have grown faster than the receipts behind them.
Funding that portion on an overdraft costs more than a term loan and carries the on-demand exposure on top. The usual remedy is to split it: term out the permanent portion over a period that matches what created it, and size the overdraft to the genuine fluctuation that remains.
New Zealand banks commonly propose exactly this at review, and it is generally better received when the business raises it first. A borrower who arrives with the split already worked out is negotiating a structure; a borrower who waits for the review is responding to one.
Interest mechanics
How overdraft interest is actually calculated in New Zealand.
Overdraft interest accrues on the daily closing balance and is generally charged to the account monthly. That daily calculation is what makes the product cheap for short dips and expensive for sustained balances, and it also means the timing of payments within a month changes the cost even when the month-end position is identical.
A practical consequence is that moving a large supplier payment a few days later, to sit behind a known receipt rather than in front of it, reduces the interest charged without changing anything about the trading position. Businesses running close to a limit commonly find more saving in payment sequencing than in negotiating the rate.
The line fee behaves differently. It is generally charged on the approved limit rather than the balance, monthly or annually depending on the bank, and it is unaffected by usage. A limit that has not been touched in a year has still cost its fee every month of that year.
Where the balance exceeds the approved limit, the excess is commonly charged at a materially higher unarranged rate and may attract a separate fee for each occurrence. On a facility that runs close to its limit, a single mistimed payment can cost more than several months of ordinary interest, which is the argument for arranging a limit with genuine headroom rather than one sized to the expected peak.
Interest on an overdraft used for business purposes is generally deductible against business income, subject to the accountant confirmation on the specific position, and the deductibility applies as the interest accrues rather than when the limit is approved.
One further mechanic catches businesses that hold both an overdraft and a separate savings or term deposit at the same bank. Interest is charged on the negative trading balance regardless of a positive balance sitting elsewhere, unless the accounts are formally set off under an arrangement the bank has agreed. Some New Zealand banks offer an offset or pooled-balance structure that nets the two before calculating interest, and where a business genuinely holds surplus funds alongside a drawn overdraft, asking whether that structure is available is commonly worth more than negotiating a quarter point off the rate.
References
Sources
- ANZ Business Lending
Indicative overdraft pricing reference.
- Reserve Bank of NZ: Lending data
NZ overdraft volume context.
- IRD: Interest deductibility
Tax framing for overdraft interest.
- Commerce Commission: CCCFA
CCCFA edge cases on overdrafts to sole traders.
FAQ
Business overdraft, NZ small-business questions answered
What is a business overdraft in New Zealand?
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.
Which lenders offer overdrafts in NZ?
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.
How much overdraft can I get?
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.
What rate do overdrafts charge?
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.
Are there fees beyond interest?
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.
How is the overdraft reviewed?
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.
Can the bank recall the overdraft?
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.
Is an overdraft tax-deductible?
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.
Overdraft vs line of credit?
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. The choice commonly depends on which institution is providing the trading account.
How fast can I get an overdraft?
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.
Can a new business get an overdraft?
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.
What happens if I exceed the limit?
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.
Related
Related reading
Business line of credit
The alternative-lender equivalent product, separate from the trading account.
Read onWorking capital
The most common reason businesses use overdrafts.
Read onANZ Business
Major-bank business overdraft and lending products.
Read onCafe loans
Recurring overdraft use is common across NZ cafe operators.
Read onSpecialty food retailer loans
Cool-storage and inventory cycles fit overdraft drawdowns.
Read on