Overdraft Loans for SMEs in India: Flexible OD Limit for Business Growth

Did you know that nearly 60% of small businesses face cash flow challenges at some point? When managing finances, having quick access to capital can make all the difference. An overdraft (OD) facility offers businesses flexible funding by allowing them to borrow beyond their available balance up to an agreed limit.

This article explores the features, benefits, and comparisons of overdraft facilities, and why they’re a valuable tool for your business’s growth and daily operations.

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What is an Overdraft Facility?

An overdraft facility allows businesses to access funds beyond their available balance, up to a pre-approved OD limit for business. This limit is set by the bank and depends on factors such as the business’s relationship with the bank and its financial health. 

With an overdraft, interest is only charged on the amount of money actually used, offering a cost-effective way to manage cash flow without the need for a traditional loan.

How does OD work?

Once the facility is set up, companies can draw funds whenever needed, with repayments linked directly to the amount utilized.

The facility helps businesses avoid the hassle of applying for loans for small, immediate expenses and provides the freedom to manage finances as cash flow fluctuates.

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Benefits of an Overdraft Facility

• High Credit Limit: Access a high overdraft limit, allowing businesses to meet substantial funding needs.
• No Collateral Needed: Unlike traditional loans, an overdraft facility doesn’t require any assets to be pledged, making it accessible for businesses without significant collateral.
• Interest Only on Used Funds: You’re only charged interest on the amount you actually utilize, which means you don’t pay for unused credit, offering a cost-effective solution.
• No Unused Credit Fees: With no commitment charges on the unused portion, you only pay for the credit you use, making the overdraft facility more affordable.

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Term Loan vs Overdraft Facility

Here’s a quick comparison of term loans and an overdraft facility to help you understand which option best suits your business needs.

For a more detailed understanding, refer to our Guide on Understanding Key Differences Between Term Loans and Overdraft

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How to Apply for Business Overdraft Facility 

Getting started with Recur Club is easy. Here's a simple step-by-step guide to apply for business financing tailored to your needs:

1. Create Your Account: Sign up on Recur Club to explore financing options specifically designed for your business. Our team of capital experts will guide you through every step of the process.
2. Submit Financial Details: Provide essential financial details such as GST filings, revenue figures, and compliance documents. You can also sync your current financial software with the platform for seamless document submission.
3. Access Capital & Compare Terms: Once your application is approved, access a range of loan options tailored to your business needs. Collaborate with our capital experts to choose the best terms that align with your growth goals.

Also, be sure to check out our Guide on Checking Business Loan Eligibility Online to learn if you’re eligible for funding!

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Conclusion

Overdraft facilities offer businesses a flexible way to manage cash flow and access quick capital. With no collateral required and interest only on the used amount, it’s an efficient financing option for short-term needs.

Looking for flexible funding options like an overdraft facility for your business? 

Recur Club is a debt marketplace that connects companies with over 125 marquee lenders, offering the best debt offers for your needs. With the guidance of a dedicated capital expert, you can secure the right funding to manage cash flow and support growth.

Recently, Recur assisted Technodysis, one of our portfolio companies, in raising ₹10 crores in structured debt to fuel its global expansion and technology innovation.

Sign Up Now!

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