Flexible business overdrafts
Business overdrafts can be a really useful way of accessing a working capital buffer when you need the cash quickly. For other businesses, they’re more like a safety net that is used rarely, but invaluable in times of need.
It has become harder to get traditional business overdrafts from the major banks, with many of them reducing or removing overdrafts currently offered to smaller businesses. This is particularly damaging to businesses with irregular income, such as firms in tourism, hospitality or retail, and can leave a significant gap in working capital levels.
Luckily, there are lots of alternatives to business overdrafts, which could help your business go after a new contract or smooth out cashflow bumps. Let's take a look at a few of the options.
Revolving credit facilities
Revolving credit facilities are very similar to overdrafts in practice. They're a consistent source of business funding with a pre-approved limit — like having a business loan that's ready to go at any time.
Just like overdrafts, you only pay for what you use, so you can dip into the funds when you need them. It's worth noting that revolving credit facilities will often have setup costs, though.
Business credit cards
Other firms use business credit cards as a source of working capital finance. They work largely the same way as personal credit cards, but with business-specific features like expenses tracking and the ability to add multiple employees to the same account.
The main benefit is reduced admin for staff expenses, and the credit limits are usually higher for business credit cards too.