Business Overdraft (OD) Loan | Dukandar Overdraft Facility
Business Overdraft (OD) Loan | Dukandar Overdraft Facility
Blog Article
A Business Overdraft Loan offers several benefits to companies in need of quick, short-term financial relief. It provides an immediate line of credit that can be accessed when cash flow is inconsistent, helping businesses meet urgent expenses. However, like all financial products, overdraft loans come with both advantages and risks.
Benefits:
- Flexibility: A Business Overdraft Loan offers flexibility as businesses only pay interest on the amount they use. This makes it an attractive option for companies that experience irregular cash flow and need funds for short periods.
- Quick Access: With a business overdraft, the borrower can access funds immediately without the long approval times associated with traditional loans.
- No Fixed Repayment Terms: Unlike term loans, overdraft loans don’t have fixed repayment schedules, which means businesses can repay the borrowed amount at their convenience.
Risks:
- High Interest Rates: While interest is only charged on the amount utilized, overdraft loans generally come with higher interest rates compared to regular business loans.
- Potential for Debt Cycle: Continuous reliance on an overdraft loan can lead to a debt cycle if businesses aren’t cautious about repayment.
- Reduction in Limit: The bank has the right to reduce or cancel the overdraft facility without prior notice, which can put the business in a difficult position if it was relying on the overdraft.
Overall, a Business Overdraft Loan can be a lifesaver for businesses in need of short-term funding, but it must be managed carefully to avoid excessive debt and financial strain. Report this page