When it comes to your business, it is usually crucial that you have enough funds in your business account to cater for your everyday cash needs.
However, it isn’t always as simple as this. Any business can see peaks and troughs, they can see a time when they are making money, and all is going well, as well as times when things seem to be a little on the low side.
It can be hard to plan for these rise and falls, which is why some businesses might want to consider arranging a business overdraft.
But what is a business overdraft and how could they be useful to you?
What is a business overdraft?
Much like a personal overdraft, the idea of a business overdraft is that they are designed to be a form of short-term business funding. They need to be agreed by a funder in advance and when you enter your overdraft you may find that you have to pay a fee, as well as the interest that is put against the amount that you borrow.
Why might you want to arrange one?
When you run a business, it is always a good idea to keep a projection of how your finances are going to look for around 12 months in advance. This will not only help you to plan for any quiet periods but will also help you to plan when you may be busy too.
If it is looking likely that you will have a quiet period and therefore that sales will be reduced, then you might find that you will be in a cash short flow. This means that the money that is being paid out against your business will be higher than what is coming in.
When this happens, you are going to need some additional cash in the business, which is when you might want to apply for and use an overdraft.
Arranging an overdraft
When you organise an overdraft for your business, the funder will want to carry out some checks on your business account, they may ask for additional information and details from you too.
The pros of an overdraft
An overdraft is a useful facility to have if you want to borrow money in the short-term, you will also only borrow the money that you need rather than taking out a large sum and perhaps spending it out on things that you don’t need.
These facilities are good for short-term cashflow solutions, purchasing stock or spreading the cost of a bill over a short period.
Can I get a business overdraft facility from my bank?
Yes, your bank may be able to offer an overdraft facility. However, in recent years we have seen that these have become more difficult to secure and may be accompanied by onerous applications to set up. Therefore, we can help you find a competitive alternative from our panel of reputable funders, that you will be able to draw down on in the same way as if you arranged an overdraft facility with your bank, but with a quick turnaround time to setup and draw down.
Business overdrafts contact us
Through our selected panel of funders, you can have an overdraft facility in place to use when needed. Typically, these facilities are kept open for 12 months, giving you the ability to obtain funds at short notice should you need to.
Contact us today to discuss how we can help you secure a business overdraft facility.
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This article has been produced by The Funding Store for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of the information contained in this article is accepted by The Funding Store (MK) Limited. In all cases appropriate professional advice should be sought before making a decision.