💸 Business Account with Overdraft: Which Banks Actually Say Yes in 2026?

But be careful: most online accounts are not banks and legally cannot let you go into the red.

Heropay helps you understand the difference between a traditional overdraft and modern financing alternatives.

In Short

• An Overdraft allows you to have a negative balance. It is reserved for fully licensed banks (Credit Institutions).

• Most online business accounts (EMIs) cannot offer overdrafts. If you hit £0, payments are declined.

• Only "Challenger Banks" with full licenses (like Starling or Monzo) offer traditional overdrafts, but approval criteria are often strict for new businesses.

• Heropay bypasses this regulatory hurdle with a healthier solution: Cash Advance. Instead of paying fees to be in debt, you get funds advanced to stay in the green.

Why do most online accounts refuse overdrafts?

You may have noticed that most Fintechs state "No overdraft facility". This isn't a business choice; it's the law.

To lend money via an overdraft, a provider must be a licensed Bank. Most fintechs are Electronic Money Institutions (EMIs).

They must "safeguard" client funds and cannot lend your money to cover someone else's debt.

This means with a standard EMI, transaction declines are a safety feature to prevent debt, but can be annoying for cash flow.

The few Online Banks offering Overdrafts

If you absolutely need a traditional negative balance facility, your options are limited to fully licensed banks:

• Challenger Banks (Starling, Monzo): Offer overdrafts, but often require a solid credit history.

• High Street Banks (Barclays, HSBC): Offer overdrafts but come with monthly fees and slow application processes.

The Trap: These banks will perform a "Hard Credit Check". If your business is new, you will likely be rejected.

The Heropay Alternative: Cash Advance without the Debt Spiral

Instead of letting you slide into the red and charging you daily fees, Heropay takes a different approach: Working Capital Financing.

The concept is simple:

• Instead of a balance of -£500 (Overdraft).

• Heropay finances +£1,000 (Advance).

• Your balance remains positive.

This solution provides immediate liquidity (available upon opening for eligible businesses) without the stigma of being "overdrawn".

The Overdraft Trap: Fees to Avoid

An overdraft feels like a safety net, but it is expensive. Watch out for:

• EAR (Effective Annual Rate): Often between 15% and 35%.

• Unarranged Overdraft Fees: If you exceed your limit, banks charge heavy penalties.

• Setup Fees: Annual costs just to have the facility available.

Comparison 2026: Bank Overdraft vs Heropay Advance