Running a business is like walking a financial tightrope, where every decision matters.
Business owners are mostly in a fix about which type of loan to opt for based on their business requirements. A term loan like an unsecured Business Loan or a Loan Against Property, or an Overdraft Facility (OD)? Or an OD-combined with term loan? We understand your struggle.
But what is an Overdraft Facility? How is it different from a term loan? And how can you leverage it for your business needs? This blog will help you understand all of this.
What is an Overdraft Facility for Businesses?
An Overdraft Facility is like a pre-approved credit line that is available for you instantly when your business requires extra funds. Unlike the regular term loan process that sometimes involve longer waiting hours and lots of paperwork, an Overdraft Facility usually doesn't take as longer and with high digital-adoption could just be a few clicks away. This is particularly useful in emergencies or when you need to efficiently manage your business cashflows. The highlight of this facility is that you need to pay interest on the amount you withdraw only.
Understanding the Overdraft Facility with an Example:
Let’s picture this: Your lender offers you an Overdraft limit of INR 50,00,000. You currently have INR 5,00,000 in your account, but there's a sudden expense of INR 8,00,000. To cover the difference of INR 3,00,000, you can access your Overdraft account and access funds in just a few clicks. It's like a short-term loan that you can withdraw and repay based on your convenience from a sanctioned limit, while you only have to pay interest on the specific amount you borrowed, in this case, the INR 3,00,000.
Key Characteristics of an Overdraft Facility:
Predefined Credit Limit: The predefined credit limit in an Overdraft Facility isn't a one-size-fits-all deal. It's tailored to each borrower, considering factors like creditworthiness and business requirements. So, whether you're a small business or an established enterprise, the credit limit is crafted to suit your unique financial needs, offering a personalized financial safety net.
Advantages of Overdraft Facility:
Overdraft Facility or Term Loan?
When deciding between an Overdraft Facility and a Term Loan for financing, it is important to consider your specific purpose, cash flow needs, and tolerance for risk. If you have a specific project or expense to fund and prefer structured repayments with lower interest rates, a term loan may be the better choice. On the other hand, if you need a safety net for fluctuating cash flow or unforeseen expenses, an overdraft facility provides the necessary flexibility. It is also imperative that you consider your comfort level with interest rate fluctuations and repayment schedules - if stability and predictability are important to you, a term loan may be more suitable, while if real-time capital and recurring funds are a priority, an overdraft facility may be preferred. Ultimately, it is important to choose the option that aligns with your financial goals and empowers you to meet your capital needs.
An Overdraft Facility, for simple ease of business, emerges as a valuable resource for business owners and can act as a financial safety net for unexpected expenses. However, before you apply for Overdraft Facility, it's crucial to grasp that it's not free money – use it judiciously to foster your business's growth when needed the most. Keep a keen eye on interest rates and potential fees for a financially savvy approach to borrowing.
Introducing Godrej Capital Flexi Funds: Your Partner in Business Growth
When running a business, having a reliable partner that understands your needs and provides flexible solutions is important. That's where Godrej Capital’s Flexi Funds come into play, offering a seamless and adaptable approach to financing for businesses of all sizes.
What sets Godrej Capital’s Flexi Funds apart?
Understanding Godrej Capital Flexi Funds Variants:
Godrej Capital Flexi Funds offer five distinct variants to cater to the diverse needs of businesses:
Example of Godrej Capital Flexi Funds in Action:
Let's consider a scenario where a business secures a Flexi Funds limit of INR 60 lakhs:
In all these cases mentioned above, businesses have the freedom to withdraw funds as needed and repay them at their convenience, with interest charged only on the amount utilized.
Unlock the Potential of Godrej Capital Flexi Funds:
Whether you're a small business or a well-established enterprise, Godrej Capital’s Flexi Funds offer the financial flexibility and support you need to achieve your business goals. With competitive interest rates, convenient interest-infused repayment options, and top-notch customer service, Godrej Capital is your trusted partner in business growth.
Apply now and unlock the power of Godrej Capital’s Loan Against Property Flexi Funds and Udyog Loan against Property Flexi Funds to take your business to new heights of success!
Disclaimer: The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com