Business Overdraft Fees Explained - What Australian SMEs Actually Pay

The fees you'll pay on a business overdraft

A business overdraft has three potential cost components: interest on drawn funds, a line fee on the facility limit, and a one-off establishment fee. Here's what each one means in plain English.

1. Interest rate (14.55% – 25% p.a.)

This is the cost of borrowing. Interest is calculated daily on whatever you've drawn from your facility. If you have a $100,000 limit and draw $25,000, you pay interest on $25,000. If you draw nothing, you pay no interest.

Rates vary based on your revenue, credit score, trading history, and the lender. Stronger businesses get lower rates.

2. Line fee (1% – 2% p.a.)

This is the cost of having the facility available. It's charged on your total approved limit regardless of whether you use it. Think of it as an insurance premium for having funds on standby.

On a $100,000 facility at 1.5% p.a., the line fee is $1,500/year or approximately $125/month. Some lenders charge this monthly, others quarterly or annually.

3. Establishment fee ($0 – $995)

A one-off fee charged when the facility is set up. Many non-bank lenders charge between $495 and $995. Some waive it entirely. This is a one-time cost, not recurring.

What about broker fees?

Through OverdraftMe: $0. We're paid by the lender on settlement. There is no cost to you for our broker service.

Real cost example

$80,000 overdraft, 18% p.a. interest, 1.5% line fee, $595 establishment fee. You draw an average of $30,000 over the year.

• Interest: $30,000 x 18% = $5,400/year
• Line fee: $80,000 x 1.5% = $1,200/year
• Establishment: $595 (one-off)
• Year 1 total: approximately $7,195
• Year 2+ total: approximately $6,600/year

That's roughly $550/month for permanent access to $80,000 in working capital. For most businesses, one extra job or one avoided late payment penalty covers it.