When a businessman needs funds for his business, he has two options either opting for long term funding from banks or NBFCs, loan against assets or term loans against assets or opting for short term funding it happens. Get loan in Delhi at Lending Bulls.
The overdraft facility allows you to continue withdrawing from your savings or current account even after the balance is zero. Availing the overdraft facility is a kind of loan, and hence you have to pay the overdraft amount within a specific period. Overdraft account holders have to pay interest on excess withdrawal from their account.
Overdraft limit is the loan amount sanctioned by the bank or NBFC to the borrower to meet his business requirements. The limit of OD is like that of a current account. The OD facility allows you to withdraw money or issue checks up to the approved OD limit, even if there is no balance in the account. It is generally a short-term loan facility for 12 months, renewable after every 12 months.
Overdraft limit or OD limit is the maximum amount that you can overdraft from a bank or NBFC. The borrower has to pay interest only on the amount utilized. Interest is calculated on the daily overdue balance and debited to the OD account monthly.
Whatever amount you repay in the overdraft account, you can withdraw it as long as the limit is not used up. Hence OD limit or overdraft facility is also called revolving credit facility.
OD limit used for uninterrupted business activity and expansion of business: As a businessman you may have to sell your goods and services on credit to your buyer and expect timely payment from your debtors. But due to various reasons and circumstances, you may or may not get the payment on time, this may lead to cash crunch. Due to liquidity problem, you may not be able to pay regular and fixed, business expenses on time like employee salary, commission, payments to your creditors etc. The supplier may stop supplying the goods and the worker may go on strike. This will not only affect your business but will also cause a lot of loss to the company. This will also affect the reputation and reputation of the company.
To get out of this situation, you can avail overdraft loan facility or OD limit from the bank, so that you do not face any liquidity problem. Timely payment of your business expenses gives you a lot of mental satisfaction and helps you to run your business smoothly. This will increase the credibility and credibility of the company.
OD limit used to meet unexpected business expenses: Life is full of uncertainty. As a businessman you have to incur some expenses for which you have not made any provision. Expenses like road accident, death of an employee, government regulations, hike in rates, taxes and fees, strike etc. require a lot of money.
If you have OD limit or overdraft facility for business from bank, it will help you to meet all these unforeseen expenses on time and your business runs smoothly.
OD limit used as a great debt consolidation tool: As a businessman you must have taken many small personal loans, business loans, gold loans etc. from banks or NBFCs. These loans are given by banks or NBFCs for a shorter tenure and at higher interest rates resulting in huge EMIs. These EMIs can also affect the liquidity of your business.
You can take OD limit or overdraft facility from the bank. The interest rate on OD limit or overdraft facility is comparatively less as compared to personal loan or business loan. You can pay off all your personal loan or business loan liability from your OD limit. Here you have to pay interest only on the amount withdrawn by you. This will increase the liquidity of your business and thus you can utilize the extra amount for the growth of your business.
Overdraft facility for business or OD limit is an agreement between the borrower and the lender (Bank or NBFC) that governs the duration of the overdraft facility or OD limit. All banks or NBFCs have their own loan eligibility criteria but there are some general loan eligibility criteria which the borrower has to fulfil in order to avail overdraft facility or OD limit from the bank or NBFC.
Following are some of the major important factors to be checked by the bank or NBFC for accepting or rejecting the overdraft facility or OD limit application:
Age: Cash Credit or CC Limit At the time of application, the applicant should be 21 years or more but not more than 65 years of age.
Business Continuity: The bank or NBFC checks the business continuity of the borrower who is applying for overdraft facility or OD limit. The borrower should be in business for the last three years to avail the overdraft facility or OD limit.
CIBIL Score: An overdraft facility or OD limit borrower, who has a good CIBIL score, will get a quick loan from a bank or NBFC. CIBIL Score is a deciding factor to approve or reject the overdraft facility or OD limit application.
Valid, Clear and Marketable Title Deed of Property: An overdraft facility or OD limit borrower should have valid, clear and marketable title deeds of the entire range of the property along with an approved sanction plan or map. The ownership and physical possession of the property is with the borrower only.
