Before you get too comfortable allowing that overdraft, remember that, although it won't be illegal as an overdraft, it is still an extension of credit to the related interest.
As such, it may need prior full board approval depending on any other credit extended to the director or related interest. This is a pretty strong argument for having a line of credit approved in advance for these businesses.
And, if your bank is already running up against the aggregate limit for credits to insiders and related interests (admittedly an unlikely event), the overdraft may not be permitted under any circumstances.
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8