Business bank overdraft
What is a bank overdraft? A current account credit is a business account with the option of being overdrawn. You have then agreed with your bank that you may be overdrawn up to a certain amount. Current account is therefore a euphemism for being overdrawn. Are you an entrepreneur? Are you applying for a current account credit from a bank? Your current account credit is then linked to your business account at the bank.
Up to what amount can you be overdrawn?
Being in the red up to a certain limit is an agreement with the bank. The amount varies from person to person and from bank to bank. The bank assesses whether you are eligible for a current account credit. The bank also determines the amount of the credit, so you cannot calculate your current account credit yourself. You can, of course, work with the bank to calculate the size of your varying credit requirement. The bank then determines whether you qualify for a limit that matches your changing credit requirement. When determining the maximum limit, the bank looks at, among other things, the turnover of your company. Do you have a good business plan? This will probably also affect the limit to be agreed with the bank.
How does a bank overdraft work?
Do you agree with your bank that you may be overdrawn on your business account up to a certain limit? Then you have a current account. The term of a current account credit is not fixed. Are you in red? Then you pay interest. You can also deposit money. Then you pay less interest. Your monthly payments are therefore not fixed. After all, your monthly payments depend on the amount that you are overdrawn and the interest rate.
What do you use a current account credit for?
Companies have varying credit requirements. As an entrepreneur you have to make regular payments. Fortunately, payments are also regularly credited to your account. Is there not enough money in your business account ? Then your current account credit can be used to pay, for example, your suppliers, your fixed and variable costs or your staff. Is your company developing positively? Do you often receive more money than you have to pay? Then you make less use of your credit. Your monthly costs will therefore be lower. After all, you only pay interest on the part of the current account credit that you actually use.
A current account credit has advantages and disadvantages
A business overdraft has several advantages. You can borrow money quickly this way. Moreover, it is not necessary to take out a separate financial product in order to have access to extra money if necessary. This bill also has disadvantages. The main drawback is that the interest you pay for overdrafts is often significantly higher than the interest you pay for a loan or revolving credit.
Apply for a bank overdraft
You can apply for a business account credit at the bank. However, a search on the internet makes it clear that there are also online lenders where you can apply for a current account. Online application does not take more than a few minutes. Do you meet the requirements set by the provider of the current account credit? Then you will usually be informed whether you qualify within 24 hours. If so, you can withdraw money with one click a few days later, whenever you want.