An Overdraft (OD) is a flexible short-term finance facility allowing a business to temporarily access funds beyond its bank account balance. It is commonly used to manage cashflow gaps, pay suppliers, or cover payroll. Overdrafts are repayable on demand and usually linked to Credit Limit and Borrowing Capacity.

Why Overdrafts Matter

Overdrafts provide immediate liquidity to cover short-term cashflow needs, especially for SMEs in the Tradie Hub, Truckie Hub, Café Hub, and Whitecoat Hub.

• Instant access to funds beyond available cash
• Reduces need for short-term loans in some scenarios
• Supports smooth supplier and payroll payments
• Helps businesses avoid missed payments and some late fees when managed carefully (interest and fees still apply on overdrawn amounts)

How Overdrafts Work

• Lender approves an overdraft limit based on cashflow, credit history, and borrowing capacity.
• Business can access funds up to the approved limit whenever needed.
• Interest is charged only on the overdrawn amount.
• Repayments restore available limit for reuse.
• Facilities can be linked to business accounts or short-term lines.

Overdrafts often complement facilities such as Business Lines of Credit, Working Capital Loans, and Invoice Finance.

Related Switchboard Resources

• Business Line of Credit
• Working Capital Loans
• Invoice Finance
• Low Doc Cashflow Loans
• Credit Limit
• Drawdown
• Facility

Official info: business.gov.au