Monzo Business overdrafts and loans: who can borrow and what it costs

Who can borrow what from Monzo Business

Monzo’s lending is built for sole traders. Limited companies have a narrower and less clearly documented set of options. These figures come from Monzo’s overdraft page and loans page, read on 9 October 2026.

One more rule applies to all of it: borrowing is for adults only, while the account itself is open to anyone 16 or over. You also need a Monzo Business account first; Monzo does not lend to non-customers.

Sole trader overdrafts

Eligible sole traders can get an arranged overdraft up to £3,000 at a representative 39.0% EAR (variable). Monzo says it charges no other fees for using it: interest is calculated daily on the overdrawn balance and added monthly, and the EAR and APR are the same because there are no extra charges.

Monzo says not every business will get the maximum, and that it only gives what it is confident a sole trader can afford. Most customers are offered the representative rate; some are offered a lower one. You can change your limit or cancel the overdraft from the app at any time, as long as you repay what you owe plus interest.

Monzo can only offer one overdraft across your personal and business accounts. If you already have a Monzo personal overdraft, that affects what is available on the business side.

What a short overdraft costs

As an illustration, being £1,000 overdrawn for 30 days at the representative 39.0% EAR costs about £27.44 in interest. Your own rate may differ. Overdrafts are designed for short gaps, such as a client paying late, and they cost far more if you sit in them for months. Monzo’s overdraft page has a calculator that works out the cost at each of its rates.

Sole trader loans

Sole traders can apply for a loan of £200 to £25,000, 19.9% APR representative over £10,000 or 29.9% up to £10,000. The term depends on how much you borrow, and if approved the money arrives in minutes, according to Monzo.

• No early repayment fees. You can overpay or clear the loan early from the app, which reduces the total interest.
• No late fees. Monzo says it does not charge them, though missed payments may be reported to credit reference agencies.
• Flexible repayment date. You choose it, and can change it without a fee.
• One loan at a time across your personal and business Monzo accounts.

The representative APR is lower on larger loans than on smaller ones, which is common in unsecured lending because the fixed cost of arranging a loan is spread over more money. Monzo’s loans page publishes a representative example for each band, showing the amount, term, interest rate and total repayable. Read the example for the band you are applying in, then compare it with the personal quote in the app.

You can see whether you are eligible in the app before applying. If you are not yet sure whether you need a business loan or simply a buffer, the overdraft is usually cheaper for gaps of a few weeks; a loan suits a planned purchase you will repay over a year or more.

Overdraft or loan: which suits a sole trader?

An overdraft is for short, unpredictable gaps; a loan is for a known cost you will repay over time. Choosing the wrong one usually means paying more interest than you need to.

If you find yourself overdrawn every month, that is a sign the overdraft is funding the business rather than smoothing it, and a loan or a change in payment terms with clients may be cheaper. Equally, taking a loan to cover a one-off three-week gap costs more than it needs to.

Limited companies: what Monzo says, and where it conflicts

This is where Monzo’s own pages disagree, so read this section as “check in the app” rather than as a promise.

On overdrafts, the same Monzo page says two different things. The sole trader section says Monzo does not offer overdrafts to limited companies. A separate section for limited company directors describes £500 to £5,000 at a representative 35.9% EAR (variable), with an annual fee and a personal guarantee. According to that section:

• only one overdraft is available per company
• only directors with admin access to the business account can apply
• the applying director must give a personal guarantee
• there is an annual arrangement fee that rises with the size of the limit, charged again on each yearly renewal
• Monzo runs a hard search on the company each time, and a soft search on the applying director

The section also says directors can check eligibility in the app, and that availability is subject to status. Our reading is that Monzo is offering company overdrafts to some directors and has not updated every page. Until its pages agree, open the app, look for the borrowing option and see what is offered, if anything. The annual fee means a company overdraft costs money even if you never use it, which is worth weighing against how often you would.

As an illustration of interest alone, £1,000 overdrawn for 30 days at the representative 35.9% EAR would cost about £25.53, before the annual fee.

Limited company loans through iwoca

On loans, Monzo’s loans page says directors can check eligibility for a Monzo business loan in the app, while its help pages say it cannot yet lend to limited companies itself. Where it cannot help, it has teamed up with iwoca, a specialist small-business lender, through partner iwoca: £500 to £35,000 at a representative 33.1% APR.

Points to know before you go down that route:

• It is iwoca’s loan, not Monzo’s. The agreement, rate and collections are iwoca’s.
• Monzo earns a commission from iwoca. Monzo says this does not affect your application.
• A personal guarantee is required, and you must have held the business account for a minimum period first, according to Monzo’s loans page.
• Compare it. A representative APR in the low thirties is typical of fast, unsecured small-business lending, but a high-street bank or a government-backed scheme may be cheaper if you can wait.

Credit checks and personal guarantees

Opening the account and borrowing are separate decisions. Applying for any Monzo lending involves a credit assessment, and the rate offered is personal to you, usually based on your credit history.

For a limited company overdraft, Monzo says the company gets a hard search, which other lenders can see, and the applying director gets a soft search, which does not affect their personal score. Several hard searches in a short period can make lenders cautious, so apply when you need the facility rather than speculatively.

A personal guarantee means that if the company cannot repay, the director who signed must. It removes much of the protection of limited liability for that debt. Read the guarantee before signing, and consider taking advice if the sum is significant. The credit check guide explains soft and hard searches in more detail and what to do with a thin or poor credit file.

Going overdrawn without an overdraft

If you have no arranged overdraft, or you go past your limit, Monzo rejects the payment free of charge. The fee sheet lists no fee for an unarranged overdraft.

A few offline payments cannot be refused, so the balance can still go below zero occasionally. Monzo tells you when it happens and does not charge, but it says it may report unarranged borrowing to the credit reference agencies if you do not repay promptly. Tax Pots and savings pots help here: keeping VAT and Corporation Tax money aside means a big bill is less likely to empty the main balance. Our tax pots guide explains how to set them up.

If Monzo says no, or you need more

If borrowing is central to your plans, a few routes are worth comparing:

• High-street banks. Barclays, HSBC, Lloyds, NatWest and Santander lend to established companies and may offer larger facilities, often after a relationship has built up. See Monzo Business vs high-street banks.
• Government-backed Start Up Loans. For businesses trading for less than five years, GOV.UK’s Start Up Loan service offers £500 to £25,000 at a fixed 7.5% a year over one to five years. It is an unsecured personal loan with a credit check, not a business loan, and it comes with free mentoring. The startups guide covers it alongside account choice.
• Keep Monzo for banking and borrow elsewhere. Your lender does not need to be your bank. Many companies hold their day-to-day account with an app bank and take finance from a specialist.

If lending is the main reason you are choosing a bank, read the Monzo Business alternatives first. Directors weighing up the wider account choice will find the limited company accounts guide useful, and sole traders the sole trader guide.

If you do open Monzo Business through our link, we both get £50, but only if you have never had a Monzo account of any kind and you download the app, apply, add money and make a first card payment within 30 days. The bonus has nothing to do with lending, and opening the account does not mean you will be offered credit.