A business overdraft is similar to a line of credit but is used for business purposes to cover shortfalls in cash flow. An overdraft is a transactional account with a credit limit, so it can have a positive or negative balance.
Overdrafts can be either secured or unsecured, with security including property or a fixed and floating charge over the business. An unsecured overdraft normally equates to high rates of interest.
An overdraft is a useful tool for a business that has a gap between outlay or invoicing and payment to manage interim expenses.