How Do Business Overdraft Repayments Work in Australia?

There are no fixed repayments

Unlike a business loan where you make scheduled weekly or monthly repayments, a business overdraft has no fixed repayment schedule. You draw funds when you need them and repay when your business receives income. Any deposit into your linked account automatically reduces your drawn balance.

What do you actually pay?

Two costs: interest on the drawn balance, and a line fee on the total facility limit.

Interest: Calculated daily on your outstanding drawn balance. If your facility is $100,000 and you've drawn $30,000, you pay interest on $30,000. Rates typically range from 14.55% to 25% p.a. depending on the lender and your risk profile.

Line fee: An annual fee (usually 1–2% p.a.) charged on your total approved limit regardless of usage. On a $100,000 facility at 1.5% p.a., that's $1,500/year or about $125/month.

Example: $50,000 overdraft

You have a $50,000 overdraft at 18% p.a. interest and 1.5% p.a. line fee. In a given month you draw $20,000 for 15 days to cover wages before a client pays you.

Interest: $20,000 x 18% / 365 x 15 = approximately $148. Line fee: $50,000 x 1.5% / 12 = $62.50. Total cost for that month: approximately $210.

If you don't draw anything in a month, you only pay the line fee ($62.50). The facility costs almost nothing when unused.

Facility reviews

Most overdraft facilities are subject to annual review. The lender assesses whether your business still meets their criteria and may adjust your limit up or down. As long as your business is performing, renewal is typically straightforward.