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What's the difference between a secured and unsecured business overdraft?

3-minute read

Having a business overdraft can help smooth out the peaks and troughs of business finances and cash flow. The options available to you include secured and unsecured overdrafts – and having a clear understanding of the difference between them could save your business money in the long run.

Key take-outs
  • An overdraft is also known as a line of credit
  • A secured overdraft requires an asset to be nominated as security
  • An unsecured overdraft requires no such security (though a director’s guarantee may be required) 
  • You can generally expect a lower interest rate with a secured overdraft


1. What is an overdraft?

A bank overdraft is an approved ‘line of credit’ that covers your transactions if your bank account balance falls below zero. If this happens and you don’t have an overdraft in place, you may be charged ‘account overdrawn fees’.


Business overdrafts – which are set at an agreed amount – can be used to cover short-term cash flow shortfalls such as when wages are due, suppliers need to be paid, or businesses go through natural seasonal downturns in income. 


With Westpac overdrafts you only pay interest on the overdraft amount you use.

Need cash for your business quickly?

Apply online for an unsecured business overdraft of up to $250k. You could get a response in minutes. T&Cs, fees, charges and eligibility criteria apply.

Apply now

2. Do I need a secured or non-secured (unsecured) overdraft?

If you want access to less than $250K, you may be interested in our unsecured business overdraft. This can provide you with additional funds in your business transaction account, without you having to offer a specific asset (such as a property) as security against the ‘loan’. Please note that a director’s guarantee will be required if you are a corporate borrower.  


If you’re looking for an amount above $250K, you could consider our secured business overdraft. This means we give you access to additional funds in your business transaction account, and you provide security for the overdraft with a specific asset.

3. How can I pay the least interest on my overdraft?

If you choose to offer security for your business overdraft, you will typically pay a lower interest rate on the funds you draw down than if you choose the unsecured business overdraft option. Bear in mind that the interest rate is lower because we secure the overdraft using a pre-agreed asset, which we can recover against in the event that you are unable to repay the overdraft.

4. What assets can I use to secure my overdraft?

If you want a secured business overdraft, we ask you to provide assets such as residential, commercial or rural property, bank guarantees and in some situations, term deposits, inventory or other investments as security. 


Tip: If you’d like to consider other ways to help manage cash flow, pay for new vehicle or equipment purchases find out more in Business loans.


Our unsecured and secured business overdrafts are ongoing (with no fixed term) and you simply repay what you can, when you can – as long as the overdraft stays under the agreed limit. Interest rates are variable, fees apply, and the easiest way to manage your overdraft is through Westpac Online Banking.

Read more

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Things you should know

Westpac’s products are subject to terms, conditions, fees and charges. Any application for finance is subject to Westpac’s normal lending criteria. 


This information does not take your personal circumstances into account, is general in nature, and should be used as a guide only – and not relied upon. We recommend that you seek independent professional advice about your specific circumstances before choosing a business finance product.