Business Overdraft (OD) Loan | Dukandar Overdraft Facility
Business Overdraft (OD) Loan | Dukandar Overdraft Facility
Blog Article
A Business Overdraft (OD) Loan is a type of short-term financing offered by banks to businesses, allowing them to withdraw more money than what is available in their current account. It’s a flexible credit facility that helps businesses manage their working capital and cash flow needs without taking out a formal loan.
How Does It Work?
With a business overdraft, the bank sets a limit based on the borrower’s creditworthiness, revenue, and account history. The business can withdraw funds up to this limit, even if their account balance is zero or negative. Interest is only charged on the amount withdrawn, not on the entire overdraft limit.
Benefits of a Business Overdraft Loan
- Flexible Funding: The primary advantage is the flexibility it offers. Businesses can access funds as needed without having to apply for a new loan each time.
- Pay Interest Only on What You Use: Unlike traditional loans, interest is calculated daily based on the overdraft amount utilized, making it more cost-effective.
- No Fixed Repayment Schedule: Unlike term loans, there is no fixed repayment schedule. Businesses can repay the overdraft as per their convenience, provided they stay within the agreed limit.
Who Can Benefit from It? Business overdrafts are ideal for small and medium enterprises (SMEs) and retailers who face occasional cash flow issues or unexpected expenses. They help manage daily operational expenses such as inventory purchases, payroll, or utility bills.
A business overdraft loan is an excellent tool for managing working capital without the need for long-term debt. It provides financial stability, allowing businesses to cover short-term cash flow gaps and focus on growth. Report this page