A business overdraft is the most flexible form of working capital finance: a pre-approved credit limit against which you can draw as needed, repaying when cash is available. For UAE businesses managing seasonal cash flow, covering payment timing mismatches, or handling unexpected short-term cash requirements, an overdraft facility is an invaluable tool.

How a UAE Business Overdraft Works

An overdraft facility allows your current account balance to go below zero — up to an agreed limit — without requiring a formal drawdown process. Interest is charged only on the amount drawn, calculated daily.

UAE bank overdrafts are typically reviewed annually. The bank assesses account conduct, the business financial performance, and current credit conditions before deciding to renew, amend, or withdraw the facility.

Eligibility for a UAE Business Overdraft

Banks typically require: 12-24 months of account history; consistent positive cash flows; a clean account conduct record (no unpaid cheques, no facility breaches); and adequate security which may include personal guarantees, property charges, or cash deposits.

The overdraft limit is typically set as a multiple of monthly account turnover — commonly 50-100% of one month's average operating turnover. Building your account turnover over time directly supports your case for a higher limit.

Interest Rates and Fees on UAE Business Overdrafts

UAE business overdraft interest rates typically range from EIBOR + 2.5% to EIBOR + 5%, depending on the bank, the client's credit profile, and the security provided. Banks may also charge a facility fee of 0.5-1% of the limit per annum.

Compared to credit card financing or informal borrowing, an overdraft is significantly cheaper. However, for longer-term working capital needs, a term loan at a fixed interest rate is often more cost-effective than a permanent overdraft balance.

When an Overdraft Is the Right Solution

An overdraft is ideal for: bridging the gap between revenue receipt and payroll dates; managing seasonal cash flow fluctuations; covering unexpected short-term expenses; and providing a cash flow cushion for fast-growing businesses.

Gulf Oasis Commercial Brokers advises UAE businesses on the appropriate mix of overdraft and term facilities — and facilitates introductions to UAE banks that are actively lending in your sector.