A business overdraft is a line of credit on your business bank account that gives you short-term cashflow.
Unlike a business loan that comes with fixed repayments and interest, a business overdraft charges interest only on the amount which you have overdrawn.
There are usually 2 types of business overdraft: Secured (by fixed-deposit or property) or unsecured (collateral free).
How it works:
- You get a overdraft facility of a predetermined limit by the bank.
- You use your chequebook or internet banking to make payments to your vendor, just like a regular current account.
- If there are not enough funds in the current account, bank will still issue funds to your vendor, as long as it is within the overdraft limit.
- You can pay back the business overdraft as and when your cashflow allows.
Up to S$500,000.
Interest rates depending on whether it is fully secured or unsecured.
Typically, it ranges from 6% to 12% annually, pro-rated daily.
You pay interest only on what you use.
Typically, the rates for overdraft are higher than for business loans.
You get to access funds at your convenience anytime.
Unlike trade facilities or invoices financing, overdraft does not require you to produce any documents or invoices to access these funds.
This makes overdraft suitable if you need emergency cashflow to pay for short term expenses such as salary or rent.
Say goodbye to bounced cheques!
Use overdraft facility sparingly, as over reliance on overdraft facilities is viewed negatively by banks in general.
Companies are better off using a business loan instead for longer term cashflow requirements.
Who can apply:
Documents required to apply:
How long does it take to approve?
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