Based on the strength of your banking history you may be able to negotiate an overdraft for yourself or your business. It is always preferable to use your business' overdraft rather than your personal one. Banks will only provide this facility if they know you will be able to repay the money (and the interest charged on the overdraft). They make their decision based on the information they have on the financial transactions going through your personal or business accounts and the credit rating of your business or you, as an individual.
The interest rate on an overdraft is always linked to the prime rate, so be sure to review it annually. The interest on the amount you’ve overdrawn is calculated on a daily basis. This is then charged at the end of each month’s cycle. Other costs to consider on top of the interest payment are:
Some banks have a new rule when it comes to overdrafts. If you accept an overdraft facility that you don’t use, be careful, they may charge you for not using it. Banks have started doing this because it costs them money to manage and monitor an overdraft!
Banks monitor overdrafts and usage of money on a regular basis as their aim is to reduce their risk. They can recall an overdraft with virtually no notice; especially if they feel you are putting them at risk. This is usually done in small amounts so that the limit decreases a little each month. Another course of action would be to convert a portion of the overdraft into a term loan, to enforce a gradual decrease of the debt.
Finfind provides its services free of charge to businesses seeking finance. Our primary purpose is to link SMEs with all the relevant finance providers and finance products that match their funding needs. As a matching service we are not required to be a registered finance provider as we do not loan money directly.