Overdraft Limit
Overdraft Limit
An Overdraft Limit is a credit facility provided by banks that allows businesses to withdraw more money than is available in their account, up to a pre-approved limit. It acts as a short-term financial cushion, helping businesses manage unexpected expenses, cash flow gaps, or urgent financial needs. Interest is charged only on the amount utilized, making it a flexible and cost-effective borrowing option.
Advantages of Overdraft Limit
✔ Instant Access to Funds – Withdraw money anytime within the approved limit.
✔ Interest on Usage Only – Pay interest only on the amount utilized, not the entire limit.
✔ Flexible Repayment – No fixed EMIs; repay as per cash flow availability.
✔ Improves Cash Flow – Helps manage day-to-day business expenses effectively.
✔ Revolving Credit Facility – Withdraw, repay, and use again within the limit.
Required Documents
✅ KYC Documents (Aadhaar Card, PAN Card, Passport, or Voter ID)
✅ Business Registration Proof (GST Registration, Trade License, or Incorporation Certificate)
✅ Bank Statements (Last 6–12 months)
✅ Income Tax Returns (ITR) (Last 2–3 years)
✅ Financial Statements (Balance Sheet & Profit and Loss Statement)
✅ Overdraft Agreement Form (Duly filled and signed)
Manage Your Cash Flow
with an Overdraft Limit!
Get instant access to extra funds with a flexible overdraft limit and pay interest only on what you use. Manage your business cash flow effortlessly!
Easy approval & sanction
Get easy approval and quick sanction on your overdraft limit with minimal documentation. Access funds whenever you need them!
Attractive interest rates
Enjoy attractive interest rates on your overdraft limit and pay interest only on the amount you use. A cost-effective way to manage your finances!
Flexible tenure & EMI
Get the advantage of flexible tenure and easy repayment options with your overdraft limit. Manage your finances with complete convenience!
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Pre-Approved Overdraft for Businessess
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Learn More About Overdraft Facility
How Does an Overdraft Limit Work?
An overdraft limit functions as a revolving credit facility that allows businesses to withdraw more money than they have in their bank account, up to a specified limit. The borrowed amount can be repaid and used again as needed, offering continuous financial flexibility. Unlike traditional loans, there are no fixed EMIs, and interest is charged only on the utilized amount for the duration it is used. This makes it an ideal solution for businesses facing short-term cash flow gaps.
Who Can Benefit from an Overdraft Limit?
Overdraft limits are especially beneficial for small and medium-sized enterprises (SMEs), retailers, and service-based businesses that experience seasonal revenue fluctuations. It helps them cover urgent expenses such as supplier payments, inventory restocking, or unforeseen operational costs. Even large corporations can use an overdraft limit to maintain liquidity and ensure seamless day-to-day transactions without disrupting their business operations.
Things to Consider Before Applying
Before opting for an overdraft facility, businesses should carefully assess the interest rates, processing fees, and repayment terms set by the lender. While overdrafts offer flexibility, exceeding the limit or missing repayments can lead to additional charges and impact creditworthiness. It’s essential to compare offers from different financial institutions and choose the one that best aligns with your business’s financial needs.
Frequently Asked Questions (FAQs) for Overdraft
How is interest calculated on an overdraft limit?
Interest is charged only on the amount you withdraw, not the entire limit. It is calculated on a daily basis and deducted at the end of the billing cycle.
Can I increase my overdraft limit?
Yes, banks and financial institutions may increase your overdraft limit based on your repayment history, business performance, and financial stability.
What happens if I exceed my overdraft limit?
Exceeding the approved limit may result in penalty charges and higher interest rates. It can also impact your credit score and future borrowing capacity.
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