When you want fast access to funds
When you need business funding, there are many different options to choose from – including small business loans and business credit cards. One popular option is a business overdraft. Offered by many financial institutions in New Zealand, a business overdraft is usually linked to a business transaction account and provides quick access to flexible credit to help manage cash flow and unexpected expenses.
A business overdraft is sometimes referred to as revolving credit because you are free to use and repay the funds up to the overdraft limit during the term of your overdraft – and you may also be able to renew the term at the end. Interest rates vary but usually interest is calculated and paid on the funds you use, for as long as you use them. Fees may apply, with some financial institutions charging an establishment fee to set up your business overdraft and some charging a service fee whether you use the funds or not.
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Why an overdraft may not be your only option
While a business overdraft may provide fast access to funds, there are other forms of finance that might suit the same purpose. If you have a particular goal in mind, or just need quick access to funds to manage cash flow, a Prospa Small Business Loan offers fast application and approval and funding is possible in 24 hours for approved NZ businesses. Talk to Prospa today.
A Prospa Business Loan could help:
Manage cash flow
Pay staff wages
Cover unpaid invoices
Buy urgent stock
Personal vs business finance
When things get tight or funds are needed for business growth, a small business owner might turn to personal savings or credit as it might seem an easy option. Keeping business and personal finance separate is important. But there are many reasons why a small business loan or business overdraft can also be a more attractive alternative.
It’s all about timing
Once it’s set up, a business overdraft from a financial institution provides fast access to funds. But a business loan from a fintech lender like Prospa can provide funding in as little as 24 hours to approved applicants. Find out why a Prospa Small Business Loan could be the alternative you are looking for.
Six scenarios you could use a small business loan
Cash is king when it comes to running a business – and being able to access cash fast could be key. Discover six scenarios where a Prospa Small Business Loan may be just what you need to keep your small business moving.
Some FAQs about business overdrafts
How does a business overdraft work?
A business overdraft is like a virtual ‘pot of money’ which you can use and repay as often as you need to. It is usually connected to your business transaction account or savings account as part of your business banking package. Some businesses find it comforting to have a business overdraft as a backup to help manage cash flow, but others find the overdraft provides an unrealistic sense of security.
With a business overdraft facility you are approved up to an overdraft limit which means you can only draw down funds up to that set limit. If you go over your overdraft limit it’s likely you’ll be charged a fee – so it’s important to read the terms and conditions carefully before you agree to any financial product.
A convenient aspect of a business overdraft is that you usually only pay interest on the amount of money you use for the length of time you use it. Interest rates vary between financial institutions. As for fees, we’ve mentioned the potential fee for exceeding your overdraft limit, but there could be an establishment fee to set up the overdraft and there may be a service fee attached to having the business overdraft facility available and this may be payable whether you use the overdraft facility or not.
A business overdraft can be a practical and handy addition to your business banking arsenal, but there are alternatives that offer quick access to funding. Talk to Prospa about our Small Business Loan with funding possible in 24 hours – as a viable alternative.
Can I get a business overdraft with a bad credit history?
As with all lending products, you will need to put in a formal application for a business overdraft. The financial institution you apply to will have its own lending criteria, and your credit history will usually be a key consideration.
Another thing the financial institution may look at is securing the overdraft facility against commercial property, residential property or other business assets.
If you are worried about your credit score or if you have bad credit, there are things you can do. Read this blog article about ‘How to improve your credit score’ with tips from a NZ financial professional.
How much will financial institutions let you overdraft?
When you apply for a business overdraft you will be approved for a specific limit. You can draw funds up to that limit. The overdraft limit is usually dependent on the financial health of your business and how much debt the financial provider deems you are able to service.
A Prospa Small Business Loan can be a good alternative to a business overdraft for some NZ business owners. You can apply for between $5,000 and $300,000 with funding possible in 24 hours. Talk to Prospa for more information.