Overdrafts are offered by your bank, either as part of the creation of a current account or at your request. In essence, an overdraft is a line of credit that is agreed with your bank for a specified amount. It allows you to withdraw money from your account, even if the balance is zero. “post-contract requirements,” a longer period covering the rules for the information lenders must provide to borrowers during the term of a regulated credit contract. Some information must be provided at regular intervals, while other information must be provided on request, for example. B a statement of account statement and a copy of the credit contract. An overdraft credit or revolving credit facility can also be helpful. Both are types of labour capital financing and have similarities such as. B interest on the amount that has been withdrawn if it has not yet been withheld. In addition, they are not interchangeable and have their own unique features and advantages. Depending on fitness and interest rates, business overdrafts can be a good way to borrow money.
but not universal. Before you commit, it is important to evaluate why you need the credit facility, what it will cost and whether you can get a better deal elsewhere. Bank overdrafts and loans can be guaranteed or unsecured. There are two types of overdrafts that you can encounter: allowed and unauthorized. An authorized overdraft is a credit that is agreed with the bank in advance, accepting the maximum amount you need. Commissions and interests were also agreed on that date. Revolving credit facilities require a minimum turnover for your business, often at least 10% of the required amount. How the amount of the loan depends on the financial capacity of your business and how long you have acted. The directors of the company must also offer a personal guarantee, as this type of credit contract does not require collateral in the form of security or assets. An unauthorized overdraft is messy, z.B. if you spend more than what is available in your bank account without agreeing with the bank that this could happen.
This results in additional costs that can grow quite quickly. If this happens almost frequently, an authorized overdraft is something your business could probably benefit from. It`s not uncommon for companies to regularly slip into unauthorized overdrafts, especially when debit payments come from your account. But they`re expensive. If you are unable to complete your current credit repayments or are at risk of exceeding your overdraft threshold, talk to your bank and try to reach an agreement. For example, the bank can repay you the debts you owe over a long period of time. If you are able to do so, it is generally easier to deal directly with your own subsidiary than with a centralized collection unit. If you are able to reduce the balance within the overdraft limit, this can reduce the cost of credit. It should be noted that commercial overdrafts are increasingly rare, as banks remove or reduce them for many small businesses. Indeed, some commercial banks currently do not offer any overdraft facilities, especially the new challenger banks. Companies operating in a consumer credit business are required to comply with the Financial Conduct Authority`s (FCA) Consumer Credit Sourcebook (CONC).
Chapter 6 of the source book contains rules and guidelines on the requirements of contract contracts, and Chapter 11 describes the right of consumer retraction.