Finance · 6 December 2017

Lloyds removes up-front fees for small business overdrafts

Lloyds TSB High Street Bank Sign
The changes will benefit businesses that only require occasional use of an overdraft

High street bank Lloyds has changed its approach to small business overdrafts, introducing a new structure designed to give business clients greater control over their finances.

For Lloyds Bank and Bank of Scotland business customers borrowing up to £5,000, new overdrafts will follow a “pay as you go” model, with a £10 monthly fee payable only if an overdraft facility is used within that month.

The new model sees the removal of up front arrangement fees for customers with a small business overdrafts limit of £5,000 or less.

Lloyds is the first mainstream lender to offer this approach, which it hopes will be particularly helpful for those business customers that only require occasional or short-term use of overdrafts, to cover unexpected costs.

The bank has also introduced new pricing tiers for small business overdrafts for customers borrowing between £5,000 and £25,000, and for those borrowing more than £25,000, as outlined below.

Borrowing limit Rate Fee
Up to £5,000 9.75 per cent above Bank of England base rate Usage fee (£10 p/m)
£5,001 to  £25,000 9.75 per cent above Bank of England base rate Annual fee (1.75 per cent)
£25,000 or more Price on application Annual fee (price on application)


The new small business overdrafts will be available to Lloyds Bank and Bank of Scotland’s small business customers from 11 December 2017, both in branch, over the phone and online. Existing Lloyds customers will be moved across to the new product in 2018.

Lloyds Bank and Bank of Scotland have pledged to write to existing business customers to explain the changes at least two months before they move to the new business overdraft.

This letter from the bank will provide support material to help customers understand the changes, and to offer additional guidance to help customers through the transition.

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Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.