Factoring | Frequently asked questions on Business Overdrafts

Frequently asked questions about Business Overdrafts

Q. Can a business only request a business overdraft if they have a history with the bank?

No, all banks vary in their terms and conditions. It is usually based on the decision of the bank manager. If you do not have a financial history with the bank you will obviously be required to provide past financial accounts and an up to date business plan, then it is up to the bank manager to decide. If the business is relatively new to the bank the amount of overdraft offered may be lower than that of an account which has been held at the bank successfully for a number of years.

Q. Is there a charge for an overdraft even if it isn’t used?

Most banks will have certain standard charges which apply whether the overdraft is used or not such as the arrangement fee, this is the charge which applied to set up the facility even if it is not actually used. However it may be more cost effective to have the provision of the overdraft than to allow the account to go overdrawn without the authority to do so.

Q. Can an overdraft agreement be cancelled at any time?

An overdraft facility is usually available for a 12 month period and if required can be renewed for a fee. If at anytime the overdraft is not required it can be cancelled but it may be a wise decision for it to remain in place until it naturally expires, if it is required later in that twelve month period the arrangement fees will be payable again.

Banks reserve the right to terminate the overdraft facility at anytime and request payment in full. See the banks terms and conditions.

Q. Are Overdraft facilities only available for short term funding?

Because of the cost implications with overdrafts, it is usually a better option to source longer term funding by other means. Your bank will be able to help with this.

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