Are you an entrepreneur looking for an additional solution to finance your business? From wholesale to childcare, the viability of your business depends on financial circumstances. Where necessary, you can resort to extra tools that can support you. In this blog, you will read about the current account credit and whether your business can benefit from this solution.
Why apply for a current account credit?
A current account credit is a flexible form of financing for businesses. A credit limit is set within which you can withdraw money and have an overdraft facility. Thanks to the flexible nature of a current account credit, you have the option to withdraw or repay amounts. The limit is determined, among other things, by the income stream. In return, you must pay interest on the amount you are overdrawn. This amount is variable and affects the interest rate.
How does a current account credit work?
If you want to use a current account credit, you do so through the bank. You can apply for this form of business credit online at both your own and another bank. The bank will assess your application based on the following information, which you also submit when applying for a loan:
- annual figures of your company
- business plan
- purpose of the credit
- desired credit limit
- any existing loans
- consideration of obligations
When you take out a current account credit, the bank usually wants to receive some form of security, such as collateral on the business premises, inventory, or debtors. Personal guarantees such as your own home or assets may also fall under this.
When is it interesting to have an overdraft?
If you are considering applying for a current account credit, it is important to determine how much benefit you will gain from it. Overdrafts bring additional costs that can be high. However, in some cases, it can be interesting for your business. For example, do you sell seasonal products, making your income partly dependent on certain periods of the year? A current account credit then offers extra financial space to stock up, meet payment obligations in the short term, or make business investments. The choice to have an overdraft can also be useful for companies that are not necessarily tied to seasons but otherwise experience large financial fluctuations.
The costs you incur for overdrafts are related to the interest you pay on them. If circumstances allow, it is always wiser to draw from your own business resources for this reason.
Alternatives to a current account credit
Applying for a current account credit is not the only solution to temporarily support your company’s financial situation. At Payt, we are happy to help you with reliable alternatives that help improve liquidity. For example, you can increase the financial space for your business with our pre-financing software. This makes it possible to arrange applications within a working day and see the money in your business account. Discover what we can do for your organization and experience the attractive benefits of our options.
