When running a business, cash flow can be challenging. Many businesses find that having a business account with an overdraft can help to support cash flow gaps.

An overdraft on your business account can be unsecured and secured. You should also check if you need to pay an overdraft line fee and what other conditions and fees are applicable. With unsecured overdrafts, you may be approved for a lower amount compared to if you were to take out a secured overdraft. The type of overdraft is limited to which one you prefer, and you should read through all the terms and conditions to make an informed choice on what is the most suitable for your individual business needs.

How does a business overdraft account work?

A business account with an overdraft will work seamlessly, so if you’re lacking funds in your account at a particular time, you can rely on your overdraft to cover any shortfalls. An overdraft is a little like having a small business loan, except you have immediate access to the funds when you need them.

An overdraft facility is a way of obtaining quick access to money. At certain times of the year, it can be challenging to manage your finances. For example, when you need to wait for vendors and customers to pay invoices, an overdraft can help you maintain your business cash flow.

Prospa’s has just launched a new business account – and plans are in place to introduce an overdraft very soon. So if you don’t have an existing bank account or want to open a business account with an overdraft at Prospa, maybe open the account now and attach the overdraft when it becomes available. Simply complete the forms online. All you need to get started is your ABN, address and driver’s licence. Opening a business account at Prospa will only take a few minutes, and your business account can be ready once you have passed our eligibility assessment and your application has been approved.

Why should you use an overdraft?

A business account with an overdraft is a great way to help your business by providing a short-term solution to resolve cash flow issues. While you may not need to use the overdraft often, it is good knowing it is there if you need it urgently. For example, if a vehicle you need for your business breaks down, you can use the overdraft to pay for the repairs, organise a new vehicle or hire a temporary replacement. The overdraft can be considered your emergency funds and called upon when needed.

When you have a small business account with a bank or other financial institution, your business overdraft is linked to that account. An overdraft is something like a short-term loan or line of credit, but it is attached to your account, and you have the flexibility to repay it when possible. Having this feature on your account provides easy access to additional money when required. Once you have opened a Prospa business account, you should read through all the terms and conditions and decide if an overdraft is an ideal solution for your business before applying to attach an overdraft to your account (once overdraft facility becomes available in the near future). You should make a note of any fees and charges that may apply.

How to use a business overdraft?

A business account with an overdraft can help you out if you find yourself in a tight spot financially. For example, if you’re waiting on an invoice to be paid, or you have bills and other expenses that are due. You can use your overdraft and make your supplier payments without waiting on any vendor or customer payments.

A common benefit of an overdraft facility is that you can use it as needed, and the interest rates are generally less than most credit cards, plus you have the flexibility to make repayments when you choose. Having an overdraft can provide some stability for your business, especially if you’re planning to grow your business in the next few months. One of the major problems that many small businesses face is a lack of funds when they need them, and an overdraft can help in this situation.

When you have a business account with an overdraft, the two are linked to each other, and you won’t use the overdraft until your cash reserves are depleted. While the overdraft can provide a good safety net, it is prudent to keep a close watch on your finances to make sure your cash flow is working optimally.

At Prospa, you can open a business account today in preparation for when our business overdraft becomes available. In the very near future you will be able to apply for them both at the same time. An overdraft is ideal for when you have unexpected expenses, but for large planned purchases, consider a Prospa small business loan. If you need assistance choosing the best financial options for your small business, our customer service team is waiting for your call.