Unlocking Financial Flexibility: The Benefits of an Overdraft Facility for Businesses

Financial flexibility is one of the fundamentals behind the success of a business. It allows a company to manage its funds better and ensure enough cash flow for the operations to run smoothly. In this process, one facility that comes in very handy is the overdraft bank account.

An overdraft account is a specific banking facility offered to certain customers. Keeping the personal banking terms aside, it provides organisations with a pre-decided credit line that they can utilise if there aren’t enough funds in the account. Typically, for companies, it is available with the current account.

Here is an example to clarify this further. Let’s say you have a company bank account with a Rs 2 lakh overdraft facility. In this case, once you run out of balance in the account, you can access up to Rs 2 lakh without prior approval.

With the basics out of the way, let’s understand the benefits of it for businesses. 

Top 3 Advantages of an Overdraft Facility for Businesses

    1. Easy Access to Credit: With the overdraft facility, you have access to instant credit, and it does not require any application and approval. You can simply use it when you need it without any restrictions.

    2. Pay Interest on What You Use: Even though it is a pre-approved credit facility, you don’t need to bear interest on the whole amount. You only pay interest on the amount you use, which lowers your business expenses.

    3. A financial Safety Net: Since financial flexibility is imperative for any business, an overdraft acts as a safety net to allow companies to perform better. Moreover, since the credit limit gets reinstated as you pay it back, it keeps helping you better manage your business finances.

So, assess your requirements well and understand the terms of overdraft and use this facility to maximise the potential of your business.