What is an overdraft

Most people will understand the fact that if you have a bank account it will normally have a zero or overdraft limit attached to it. Overdraft means you are taking more money out of the account than it has available going into ‘negative territory!

 

An overdraft will normally love you to borrow more money through your current account then you have in your current account. There are two types of overdraft.

 

Authorised overdrafts are usually arranged in advance with your bank or lender. Operating within that authorised overdraft will be at an agreed cost but it will be much cheaper than an unauthorised overdraft.

 

Unauthorised overdraft means that you did not set up the agreement with the funder or bank before drawing more money out of the bank facility then is allowed.

Because the bank has not provided for that overdraft and it unexpected, the bank will charge quite hefty fees and charges for exceeding the authorised level.

Does your business need an overdraft, and can you get one!?

Does your business need an overdraft, and can you get one!?

An overdraft should only really only be used as an emergency funding situation or to cover exceptional payments. For example the quarterly payment of VAT or rents for your business premises.

So, if your business as always in a permanently overdrawn position, it may be time to look at other forms of finance. We are sure that the bank will be encouraging you to do this too!

Generally the banks prefer not to give overdrafts nowadays because they have to provide for capital that may or may not be used. This uncertainty means because the banks charge more for these facilities than fixed lending or term loans

Donec id elit non mi porta gravida at eget metus. Nulla vitae elit libero, a pharetra augue. Maecenas faucibus mollis interdum. Maecenas sed diam eget risus varius blandit sit amet non magna.