Monzo business loans and overdrafts

What it is

Monzo offers two credit products to business customers: arranged overdrafts and term loans. Both are applied for in the app, both are decided quickly, and neither is tied to a paid plan.

That matters because the received wisdom — including on this site until we checked — is that digital business accounts do not lend. Monzo does.

The numbers

Overdrafts

• Sole traders: up to £3,000. Representative EAR 39.0% variable. Two rates exist, 29.0% and 39.0%, and Monzo says most customers are offered 39.0%. No fees for using it.
• Limited companies: £500 to £5,000. Representative EAR 35.9% variable, with rates of 19%, 29% or 35.9%. An annual arrangement fee applies: £20 for £500–£1,000, £50 for £1,001–£2,500, £100 for £2,501–£5,000.
• One overdraft per customer across personal and business accounts; one per company.
• Company applications need a personal guarantee from the applying director, a hard search on the company credit file and a soft search on the director.
• Renewal is annual: another fee, another hard search.

Loans

• Sole traders: £200 to £25,000. Representative 30.6% APR up to £10,000, 19.9% APR above it.
• Limited companies: £1,000 to £25,000, representative 30.6% APR. The account must be at least 30 days old and a personal guarantee is required.
• No early repayment fees and no late fees. Overpay and the total cost falls.
• Where Monzo declines, it refers you to iwoca — and states plainly that it earns commission for doing so.

Who it genuinely helps

• Sole traders needing a short-term gap filled fast, where a branch application would take weeks they do not have.
• Businesses that would otherwise use a credit card — the loan APRs compare reasonably against card borrowing.
• Anyone who values no early repayment penalty. Overpaying genuinely reduces the total cost, which is not universal.

Where it falls short

• Expensive. A representative 39.0% EAR on a sole trader overdraft is well above a high-street facility if you qualify for one.
• Personal guarantee on company borrowing. This sets aside the limited liability you incorporated for, on that debt.
• Arrangement fees on company overdrafts, charged again every year on renewal.
• Hard credit search on the company for overdraft applications, and again at each renewal.
• Small limits. £5,000 is a buffer, not working capital for a growing business.

What else does this

Starling offers business overdrafts on application, priced more conventionally. It is the other free digital account that lends.

Barclays, NatWest and Lloyds make lending central to the relationship, with far larger facilities and materially lower rates for businesses that qualify. The trade-off is time and paperwork.

Mettle and Revolut do not lend at all.

Our verdict

Genuinely useful, and rarer than we had credited. We previously described Monzo as an account that does not lend. That was wrong, and it materially understated its feature range — we have raised its score accordingly.

What Monzo sells here is speed, not price. An in-app decision in minutes, with no early repayment penalty and no late fees, is a real proposition for a sole trader facing a cash-flow gap next week. A high-street overdraft at a fraction of the rate is no use if it takes a month to arrange.

But be clear about the cost. A representative 39.0% EAR is expensive money, and the limited company version adds a personal guarantee and an annual fee that recurs. Use it as a short-term bridge and repay it quickly — the products are explicitly designed to cost less that way. As a standing facility it is poor value, and if you qualify for high-street lending you should take it instead.

Read our full Monzo review →