A guide to overdraft facilities for small businesses

Often referred to as a business overdraft, it can be defined as a revolving line of credit attached to your business transaction account, allowing you to draw on funds, when you need, up to a pre-approved limit. This is especially useful to small business owners, providing immediate access to funds while helping manage cash flow and handle unexpected expenses.

Keep in mind that to qualify for a business overdraft at NAB, you must have a business bank account, and access to NAB Internet Banking to accept and receive your loan application documents.

What are the key benefits of overdraft facilities for small businesses?

Overdraft facilities offer several advantages for small businesses, including immediate liquidity, cash flow support, and operational flexibility. Let's take a closer look at each of them.

1. Immediate liquidity

An overdraft facility can provide your small business with immediate liquidity, allowing access to funds when you need them. This can be useful for:

• Covering day-to-day operational costs.
• Managing unexpected expenses.
• Taking advantage of business opportunities requiring immediate funding.

2. Cashflow support

Managing cashflow can be tricky even at the best of times. Overdraft facilities provide crucial support for managing cash flow, which is a lifesaver during periodic financial shortfalls. They can also help with difficult situations, such as:

• Dealing with late invoice payments from customers.
• Managing seasonal fluctuations in revenue.
• Covering costs during periods of business growth or expansion.

3. Operational flexibility

A overdraft facility provides greater operational flexibility, helping your small business manage its finances in a way that suits its unique needs and circumstances. Some examples of practical applications include:

• Using the overdraft facility as a short-term solution for managing small business expenses.
• Having the flexibility to repay the overdraft at a pace that suits your small business's cash flow.
• Only paying interest on the funds used, rather than the entire overdraft limit.

Overdraft facility and business credit card considerations

It's important to understand the differences between overdraft facilities and business credit cards when weighing up financing options for your small business, because each has its own benefits and risks.

Here are some important points to consider:

• Credit limits: some business credit cards may have higher credit limits compared to overdraft facilities, providing more flexibility for larger purchases.
• Repayment terms: overdraft facilities do not have fixed repayments, whereas business credit cards require a minimum monthly payment.
• Rewards and benefits: some business credit cards offer rewards programs and other benefits, which are not typically available with overdraft facilities.
• Interest rates: overdraft facilities typically offer lower interest rates than business credit cards, making them cost-effective option for longer-term borrowing.

Business credit cards for small businesses

When used appropriately, business credit cards can be a useful tool for managing everyday small business expenses. They offer larger credit limits and may come with rewards programs and other benefits. However, they also typically have higher interest rates than overdraft facilities and require a minimum monthly payment. It’s also important to be aware of any annual fees associated with the card.

Overdraft facilities for small businesses

Overdraft facilities, such as the NAB QuickBiz Overdraft, offer lower interest rates compared with business credit cards, making them cost-effective option for short-term borrowing. They provide immediate access to funds and can be particularly useful for managing cash flow and handling unexpected costs.

Learn more about NAB QuickBiz Overdraft

NAB offers a range of overdraft facility options to suit the individual needs of small businesses at all stages of growth.

The NAB QuickBiz Overdraft is an unsecured business overdraft facility offering a fast online application and approval process. It provides a revolving line of credit of up to $50,000, with no fixed repayments.

Remember to check the NAB QuickBiz Overdraft eligibility requirements before applying, or speak with a NAB business banker to see if accessing a business overdraft facility is the right option for you.