Amounts: R5k to R4m+
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Speed of Funding: Medium
Terms: No term
Repayments: Repay as you go
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Interest Rates: Prime linked

 

What is an overdraft?

An overdraft is a lending product commonly offered by the banks. The lender is offered an overdraft limit and interest is charged against any monies drawn down against this limit.  The overdraft is normally linked to a bank account. Money can be deposited into or withdrawn from this account at any time. The overdraft limit cannot be exceeded. Normally, the lender charges interest on money drawn from this account as well as a fee based on the overdraft limit. The amount of the overdraft limit depends on the performance of the business as well as the type and value of the security offered. There is no term assigned to an overdraft facility nor a minimum repayment.

 
 
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ADVANTAGES

  • Flexible
  • No fixed repayment
  • Accessible
  • Creates a credit history

Disadvantages

  • Require security
  • Need sound trading history
  • Fees can be high
  • Normally requires director surety