Business Overdraft Ireland: Costs, Annual Reviews and When to Switch (2026)

Here's something most business owners only learn the hard way. Of all the money your bank lends you, the overdraft is the one it can take back with a letter. No missed payment, no breach, no default. The facility just comes up for its annual review and comes back smaller.

Don't get us wrong: overdrafts are still the cheapest way to cover a short gap between paying out and getting paid. The trouble starts when the balance stops swinging. A €75,000 limit that's sat at €50,000 overdrawn for two years isn't working capital any more. It's a loan with none of a loan's protections, and your bank's credit team can see that as clearly as you can.

So in this guide we'll walk you through how business overdrafts really work in Ireland right now, what "repayable on demand" and the annual review mean for you, the fees hiding behind the headline rate, why banks keep trimming limits, and when you should move a stuck balance onto a term loan or revenue-based facility instead.

How a Business Overdraft Works in Ireland in 2026

Let's start with the basics, quickly. A business overdraft is a limit on your business current account. You can run the balance below zero up to that limit, you pay interest daily on what you're actually overdrawn, and the bank takes that interest from the account every quarter.

When customers pay you, the balance swings back up and the interest stops. That's the whole appeal.

It's priced on a variable rate. Bank of Ireland publishes a standard business overdraft rate of 8.05% variable, and your own rate depends on your risk grade, the security and the size of the limit. AIB and PTSB work the same way. All three will want accounts, a current tax clearance cert and, for a limited company, often a personal guarantee or a debenture over the company's assets.

Now here's the bit most owners skim past. Two features make an overdraft different from every other kind of business borrowing, and both favour the bank:

• It's a 12-month facility. A "permanent" overdraft is permanent in name only. It runs for a year, it's reviewed on the date in your letter of offer, and the bank doesn't have to renew it.
• It's repayable on demand. Your facility letter says so in plain words. A term loan can only be called in if you break its terms. An overdraft can, in principle, be called in whenever the bank decides.

One more thing to check in your facility letter: the security clause. Bank of Ireland's overdraft terms say that any security the bank holds, now or in future, secures all your liabilities to it. In plain English, the debenture or guarantee you signed for a modest overdraft can also stand behind every other loan you have with that bank. That's normal, but it's worth knowing before you assume a small facility carries small strings.

Repayable on Demand and the Annual Review: What Actually Happens

Will your bank ring you out of the blue and demand €60,000 back? Almost never, if the account is performing.

What actually happens is quieter. At the annual review the limit comes back smaller, or with new conditions, or with a polite request to "reduce the facility over the next 12 months". You don't get a demand. You get a slow squeeze.

You have more rights here than you'd think. Under the Central Bank's SME Lending Regulations, a regulated lender that withdraws or changes your facility has to give you its reasons in writing and tell you how to appeal. It also has to offer micro and small businesses an annual meeting that includes a review of their facilities. And if you bank with AIB, Bank of Ireland or PTSB and the internal appeal goes nowhere, the Credit Review Office can look at a refusal or a cut. It can't overrule the bank, but the bank has to follow its recommendation or explain why it won't.

Here's what we see again and again. The owners who lose limits aren't usually the ones with bad figures. They're the ones who ignored the review, so the bank filled the silence with its own assumptions.

What a Business Overdraft Really Costs: Fees, Surcharges and Excesses

The headline rate is only part of the bill. When we go through a client's bank charges, these are the items that add up:

That surcharge line is worth a second look. Bank of Ireland's terms still describe a 12% a year surcharge on unauthorised excesses, but say it hasn't been charged since August 2021. That's a policy, not a promise. Other banks set their own terms, so read your own facility letter.

And honestly? The fee isn't the real cost of going over your limit. Your credit record is.

Under the SME Regulations, an overdraft that sits over its approved limit for 30 consecutive days counts as arrears. Hit 90 consecutive days and the lender can treat you as being in financial difficulty. A breach of overdraft terms is also one of the specific triggers that lets a lender pull your Central Credit Register report. So the "informal excess" the branch tolerated for a few months can turn up in your next loan application. We explain how lenders read that record in our guide to your business credit score in Ireland.

Why Irish Banks Keep Shrinking Overdraft Limits

Overdrafts have been out of favour with the pillar banks for years. A 2017 parliamentary answer showed overdraft sanctions at AIB and Bank of Ireland falling year on year from 2014. Some of that was healthier businesses needing less. But a lot of it is how banks see the product, and that hasn't changed.

Think about it from their side. The full limit counts as money you could draw at any moment, even when you're not using it. The balance never pays down. And the bank only spots trouble late, when the account stops swinging. A term loan, by contrast, shrinks every month and flags a problem the day a payment is missed.

So at review, a credit team really asks one question: does this account actually swing?

If your balance moves between credit and the limit with your trading cycle, renewal is usually a formality. If it's sat at 80 to 95% of the limit all year, the bank sees term debt dressed up as working capital. That's when limits get trimmed and conditions appear.

The Hard-Core Overdraft: Is Yours Secretly a Loan?

A hard-core overdraft is the part of your balance you never clear. Here's a two-minute test you can do today.

Pull 12 months of statements. For each month, note the best point, the least overdrawn the account got. If it never got better than €40,000 overdrawn, then €40,000 of your "overdraft" isn't working capital. It's permanent borrowing, without any of a loan's protections.

So what does that actually cost you? Say you've a €75,000 limit and the balance never rose above €48,000 overdrawn all year. At 8.05%, that hard-core €48,000 costs you about €3,860 a year. Leave it for three years and you've paid roughly €11,600 in interest, you still owe €48,000, and you're exposed at every review. Add the 0.5% credit-swing surcharge and it's worse.

How does it happen? Nearly always the same way. A one-off cost (a fit-out, a van, a Revenue bill, a customer who went bust) got paid out of the overdraft because the room was there. Two years later nobody remembers why the account never swings.

Overdraft vs Term Loan: Moving the Hard-Core Somewhere Better

The fix is simple. Split the two jobs. Put the hard-core balance on borrowing that pays itself off, and keep a smaller overdraft for genuine timing gaps.

Run the numbers on the example above. A €45,000 term loan at 9% over three years is about €1,431 a month. Total interest is roughly €6,500, and the debt is gone at the end of year three. Compare that with €11,600 of overdraft interest on a debt that never shrinks. You keep a €30,000 overdraft for real swings, and because that smaller limit now clears into credit, it's far easier to renew.

Our fixed-term loans run from €30,000 to €300,000 over 12 to 48 months, which covers most of the hard-core balances we see. Here's how the main options stack up:

Seasonal business? A fixed monthly repayment might pinch in your quiet months. Revenue-based lending is repaid as a share of your takings instead, so a slow month costs you less.

If your overdraft is really funding the gap while customers pay, look at invoice finance instead, and our head-to-head on invoice finance vs overdraft shows which suits which business. And if you like the draw-and-repay feel of an overdraft but not the annual review, a business line of credit from an alternative lender works much the same way and sits outside your bank relationship altogether.

One tip that's worth real money: term out the hard-core before the review, not after it. A bank that's just cut your limit holds all the cards. A bank that sees you've already sorted your borrowing sensibly usually renews the smaller overdraft without a fight.

Seasonal business? Ask about a seasonal limit instead of a bigger permanent one. Plenty of retailers, hotels and agri suppliers need extra room for three or four months a year and very little the rest of the time. A limit that steps up for the busy build and back down afterwards is an easier yes for the bank, and it stops a temporary peak from looking like permanent borrowing at review time.

How to Keep Your Business Overdraft at the Next Review

Plenty of trading businesses should keep an overdraft. For genuine swings it's still the cheapest facility around. Just go into the review ready:

1. Prove the swing. Plan your cash so the account is in credit for at least 30 days in the year, even if that means timing a supplier run.
2. Send management accounts before they ask. Year-to-date figures and a 12-month cash flow forecast show the bank your seasonal pattern instead of leaving it to guess.
3. Explain any excess. A short note on why you went over in March, and how you cleared it, defuses it before it becomes an arrears flag.
4. Keep Revenue and the CRO current. A lapsed tax clearance cert or a late annual return turns a routine renewal into a credit problem. Our checklist of business loan requirements covers the paperwork.
5. Get any change in writing. If the limit is cut, ask for the reasons and the appeal process. A regulated lender has to give you both.

Keep the Overdraft for Swings and Put the Core on a Loan That Ends

A business overdraft in Ireland is still a good tool, as long as you use it for what it's built for: short gaps between paying out and getting paid. Used that way, it renews quietly and costs very little.

Used as permanent borrowing, it's the most expensive and least secure debt you've got.

So do the 12-month statement test this week. If part of your balance never clears, move it onto a term loan or revenue-based facility while your figures are strong, and keep a smaller overdraft that actually swings. Juggling several facilities already? Our guide to refinancing business debt shows how to tidy them into one.

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