In a tough economic downturn, a business overdraft may be just what you need to tide you through the tough times. Equally it may be just what you need to help you with day to day expenses when you are in the difficult early days of starting a business up. Overdrafts are not considered to be a good option for a long term loan, as over a long period of time they can become quite expensive, they are more appropriate as a short term cash boost when you need it. Perhaps you need to make some purchases for your company which were unexpected, but you are able to pay back quickly. An overdraft will be perfect to help you with this kind of cash flow issue.
Your overdraft will be set a limit as agreed by you and your bank, and you will be able to draw on it at any time. You are able to make your overdraft suit your needs perfectly. Each year you will be able to review your overdraft and renew it if you see fit. If you choose to take an overdraft shorter than a year you will be able to make a decision about continuing with your overdraft when it comes to the end of its specified term. The advantages of having an overdraft are:
- Its flexibility
- Ease to attain/set up
- No early repayment fees
- Only pay interest on what you use. Often daily interest will be calculated on a business overdraft.
However do be aware that your overdraft can be subject to fees should you find you need to extend it, expectedly or unexpectedly. This is because if you extend your overdraft you will usually have to pay an arrangement fee (you also have to pay an arrangement fee when you initially set up your overdraft) and if you exceed your overdraft limit without permission you will be charged. If you have not agreed to take out an overdraft at all, i.e. you have gone overdrawn on your business account without having an arranged overdraft in place; you will be subject to daily fees on the amount for each working day you are overdrawn.
Business overdrafts, just as with any business loan, are secured against your assets. Your business will be forfeited should you get into financial difficulties, or if you have secured your overdraft against the value of your home, your home may be repossessed.
Your overdraft will be set a limit as agreed by you and your bank, and you will be able to draw on it at any time. You are able to make your overdraft suit your needs perfectly. Each year you will be able to review your overdraft and renew it if you see fit. If you choose to take an overdraft shorter than a year you will be able to make a decision about continuing with your overdraft when it comes to the end of its specified term. The advantages of having an overdraft are:
- Its flexibility
- Ease to attain/set up
- No early repayment fees
- Only pay interest on what you use. Often daily interest will be calculated on a business overdraft.
However do be aware that your overdraft can be subject to fees should you find you need to extend it, expectedly or unexpectedly. This is because if you extend your overdraft you will usually have to pay an arrangement fee (you also have to pay an arrangement fee when you initially set up your overdraft) and if you exceed your overdraft limit without permission you will be charged. If you have not agreed to take out an overdraft at all, i.e. you have gone overdrawn on your business account without having an arranged overdraft in place; you will be subject to daily fees on the amount for each working day you are overdrawn.
Business overdrafts, just as with any business loan, are secured against your assets. Your business will be forfeited should you get into financial difficulties, or if you have secured your overdraft against the value of your home, your home may be repossessed.