Business Overdraft

A Funding Circle loan may be cheaper than a business overdraft

If you use your overdraft to make large purchases and then pay it down overtime then a monthly repayment loan may actually be cheaper.

A bank will charge you an annual fee on your maximum overdraft limit, not the actual amount you use. This means overdrafts are very expensive when you are not fully using them. For a business loan on the other hand you only pay interest on the amount you use.

Funding Circle is an online marketplace where small businesses can borrow directly from people, sidestepping the banks to lower cost finance. Watch the video to the right to see how it works.

A business overdraft is an optional additional service to your current account. Debit interest and overdraft fees may be payable for on an overdraft. There are two ways in which fees can be charged, formal and informal charging. A formal charge will take place when you have made an arrangement with your bank to discuss your overdraft. This arrangement fee will be charged each time you renegotiate your overdraft. Informal charging will occur every time you exceed your business overdraft limit, even if this is only by one pound. Some banks may consider that you have exceeded your overdraft limit even if you have transferred in funds that have not yet cleared.

A business overdraft is a flexible way to borrow, however most banks withhold the right to withdraw this facility at any time. Your overdraft provider can write to you demanding the immediate repayment of your overdrawn balance along with accrued interest, fees and any charges. Your company may have agreed an interest rate to be charged on your overdraft but if this is a variable rate overdraft, the bank may have the discretion to change this at any time.

A Funding Circle loan may be comparable to a business overdraft as no collateral is required and unlike most other business bank loans you are not as restricted to the loan term. At Funding Circle you can pay back your loan early at no extra cost. Our fixed monthly repayments mean that your company can manage their finance as you know exactly what your outgoings will be each month.

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