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Business overdraft disputes

Whenever a business opens a commercial bank account or requests some changes to their account, all of the applicable terms and conditions should be made clear to them by the bank, so all parties are clear about how things work. One area in which disputes can sometimes arise between companies or organisations and their banks are when they have business accounts with overdraft facilities, where the interest rate and other charges or fees may be disputed if the business feels that they were not communicated properly or are unfair.

Stephensons can help businesses if a dispute does arise in relation to their overdraft. Our experienced team have a proven track record of resolving problems like this, and we always strive for the best possible outcome for every client. Get in touch with our team today on 0161 696 6170.


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Frequently asked questions about business overdraft disputes

If a dispute arises with your bank over your business overdraft, you might be looking for information on what you should do next. We have collated information on some of the topics in relation to this that we are asked about most frequently. If you can’t find the information that you are looking for below, please contact our team, who will be happy to help. Call us on 0161 696 6170.

How does a business overdraft work?

An overdraft, by definition, for businesses, works in a similar way to an overdraft on a personal current account. If a business wishes to have access to funds in excess of the account balance, they can set up a company overdraft facility with their bank. Essentially, the business overdraft limit will be set by the bank, and the business may use funds up to that limit if required, with interest being charged on the money borrowed. There may also be other management fees in relation to a business overdraft, meaning that the company may pay a monthly or annual fee on top of interest charges for this facility.

The bank or overdraft company may wish to set up a ‘secured overdraft’ if they are concerned about a business’ ability to repay the money. This means that the company will use a business asset, such as commercial property, as security. If the business cannot pay back the overdraft balance that they have borrowed within the terms set out in the agreement, the bank will have an ownership claim on that business asset.

Unsecured overdrafts don’t require an asset as security, but they often have higher interest rates on the money that the business borrows.

The advantages of overdrafts for businesses

Any business owner will know that cash flow is all important in having a successful company. A business account with an overdraft facility can provide something of a safety net, in case of an unexpected expense. This kind of facility can help a business to deal with short-term funding needs, such as:

  • Paying for unexpected expenses
  • Settling outstanding invoices
  • Buying stock
  • Dealing with issues with the supply chain
  • To manage cover for overdue invoices owed to your business

Types of business overdraft disputes

Whilst most business overdraft agreements run indefinitely without any issues, there are some instances when the business and the bank can find themselves in dispute. This could be due to the business feeling that they were not made aware of all of the terms and conditions of the overdraft agreement before it was signed. They may also feel that some of the terms of the agreement are unfair or that the lender is not holding up their end of the contract. Other reasons for disputing overdraft agreements or charges could be if the term wasn’t incorporated into the agreement before it was finalised, or if the lender doesn’t act as it should in accordance with the overdraft agreement.

If a business is charged fees or penalties that they disagree with, they might want to dispute those with their bank. Sometimes these may have been miscalculated, in which case, the business can ask for a refund of costs that were over and above the agreed terms.

If you have a dispute with your bank in relation to your overdraft facility, our experienced team can help you to resolve the issue. Get in touch today by calling 0161 696 6170.

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