Overdrafts

• What is an overdraft

  An arrangement for business current account holders to spend more money than it has in their account - a limit is agreed
• advantages of overdrafts

  Useful to a business in order to get through poor trading periods

  a short term source of finance that offers significant flexibility and helps cash flow
• Drawbacks of overdrafts

  there can be big fines for a business if they go over the overdraft limit.

  overdraft may be called in if the bank is concerned about a business‘s ability to repay what it owes