Most of those who run their own businesses when they need extra cash reach for a cash loan. It turns out, however, that there are better solutions, such as a revolving loan for companies on the current account.
When running our own business, we often need additional funds to buy or cover previously unpaid expenses. Borrowing a loan in such a situation, not only that it involves a lot of time to complete the formalities, it also carries a long series of installments that we will pay off for the next month or even years.
Why a revolving credit for overdraft companies will be a good solution and in what situations will it work best?
Overdraft is something like a debit or a limit in your account . We receive a specific pool of funds, which we can additionally use. The amount of such a limit most often depends on the amount of income of a person running a business. The more important the receipts for our company account are, the more chances we have to get a higher limit in the account. Most often it is a multiple of monthly income. So, for example, if our monthly income is PLN 5,000, then the bank will be able to propose a limit of PLN 15 or 20,000. We will be able to use this money additionally, provided we meet the requirements set by the bank. These, however, are not particularly high, provided that we have a sufficiently high inflow to our company account.
What requirements should be met to obtain credit for companies on the current account?
Of course, you must have an open business, at least for some time, so that the bank can assess our creditworthiness. Usually, you can apply for such a renewable loan after exceeding 12 months from the start of running your own business. Therefore, it is not a product intended for completely new companies . Once the bank has already granted us a revolving limit on the account in a certain amount, we will have to ensure that the account receives a certain amount of income each month. Usually, the minimum amount is PLN 5,000. If every month such amount will flow through our company account, the bank will renew our account limit after 12 months and we will still be able to enjoy access to additional cash.
What can a renewable loan for companies be allocated for?
It does not matter much, they are additional resources that we can use depending on our needs. Running our own company, we know perfectly well that we have such moments that we need such additional money. Sometimes our contractor does not pay on time and we must pay in the meantime social security contributions and pay VAT or PIT to the Tax Office. Thus, money that constitutes an additional part of our company account, we can at any time spend on additional expenses related to the business or finance the purchase of some materials necessary for us.
What are the main advantages of a revolving loan in a current account?
The main plus is the constant access to additional cash, which we can use at any and most convenient time for us. There is no ready repayment schedule or monthly installments. The repayment of debt can be made at any time, when the moment will be the most suitable for us and will not burden our budget. However, it is worth remembering that if for some reason your account will not receive a monthly income of a certain amount, the bank may not renew our account limit after 12 months. And in this situation, the bank may ask us to repay the debt. In general, however, there is no need to pay the full amount before the renewal date . However, it is worth taking care that the conditions set by the bank are met, then we will be able to enjoy the loan in the account not only for the next 12 months.
The revolving limit for overdraft companies – how much does it cost?
This solution is definitely cheaper than traditional credit or loans. We pay an annual fee for renewing the overdraft limit and it depends on the amount of the limit granted. It may be, for example, 1% of the sum of the granted limit, so if the bank gives us a limit of say – PLN 20,000, we will pay PLN 200 for access to such a limit annually. In addition, we will pay the fee when you use the limit, so when our account will see a decrease in the balance below zero. When the limit is not used, the bank will not charge you additional fees. The fee is therefore charged by the bank only for the days in which we use the debt.