Overdraft for new Business Account?

Hi,

I am just starting a new business and am sorting out my business bank account. The bank has suggested that I set up an overdraft facility. Is this advisable? I am not a fan of credit.

Thank you.
MM.

In the present climate I think you are lucky that you are being offered an overdraft in the first place without any trading history. However the bank will want a personal guarantee signed for this facility. If your personal finances are sufficent to start up your business you do not need a business overdraft but this would not seem to be the case otherwise why would the bank be offering you one seeing that you are hesistant in taking one.
Are you going to use your own personal money as start up capital ?
How are you going to finance the initial costs of running your business ?
Maybe you have no choice but to use the overdraft on offer if you want to start the business !!

Max Million said:

Hi,

I am just starting a new business and am sorting out my business bank account. The bank has suggested that I set up an overdraft facility. Is this advisable? I am not a fan of credit.

Click to expand...

You don't have to use the facility ! Personally would rather have it and know that it's there than to maybe have to come looking for one in six months time.

Max Million said:

Hi,

I am just starting a new business and am sorting out my business bank account. The bank has suggested that I set up an overdraft facility. Is this advisable? I am not a fan of credit.

Thank you.
MM.

Click to expand...

If they are offering you credit you obviously have cash flowing through your account, overdrafts are expensive, trust your instincts, put money aside for a rainy day and be prudent. Early to bed early to rise, work like hell and advertise

demoivre said:

You don't have to use the facility ! Personally would rather have it and know that it's there than to maybe have to come looking for one in six months time.

Click to expand...

+1

However, check if there is a facility fee.

Even in the best managed businesses, cash flow is unpredictable. Customers don't pay when they should. You get an opportunity to buy liquidated stock very cheaply for cash. You might get settlement discounts from ordinary suppliers.

It's important that a business is well capitalized, but there is nothing wrong with borrowing money which is used wisely.