Applying for an overdraft

on_way_to_fame

Hi,

I recently opened my first ever business banking account with Abbey National..I was attracted to the service, because I think it is the only free business banking account (or I think maybe A&L provided free business banking for a while..not sure if they still do?) and hence very suitable for a small start up. Now, I wanted to apply for an overdraft and I have requested them for an overdraft form, however before I send in the from, I just wanted some advice on what sort of factors do they look in before deciding whether they want to give you an overdraft and deciding on an interest rate? ..

Just for some more detail, My business is very new, and the account in 3 months old now. Money going in and coming out of the account at the moment is aound the 1000 - 1500 GBP mark monthly. I need an overdraft of about 4000 - 5000 GBP..however I am not sure if it is too much? Ideally, how much should I apply for? Also, should it make a difference, as this is my first application to this bank?

P:S: The business account is on my uncle's name, and he has a good credit history I believe, as he also has other well established businesses.

Astaroth

What sort of business are you? Sole trader? Limited company? Partnership?

For a sole trader and partnership you and the company are one and the same thing legally - you are not seperate legal entities. An application for credit therefore will be handled in a very similiar way to a personal application - it will look at your (and your partners if any) credit rating, how the accounts have been going and the added aspect of probably reviewing your business plan again.

For a limited company you and the company are 2 seperate legal entities and therefore the credit history search etc is only done on the company and not you. For a new business they are therefore more heavily reliant on your business plan and can look at things like the amount of capital you/ your shareholders have put up as a sign of how much of a risk others have been willing to take on you - if you have only sold 1 share for £1 to yourself it doesnt sound like even you think it is a good risk.