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Canada (511,185)
Brock University (12,137)
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ACTG 1P71 (70)
Lecture

overdraft part 2

3 Pages
128 Views

Department
Accounting
Course Code
ACTG 1P71
Professor
Richard Brown

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Description
Financing using an overdraft Overdraft financing is provided when businesses make payments from their business current account exceeding the available cash balanceAn overdraft facility enables businesses to obtain shortterm fundingalthough in theory the amount loaned is repayable on demand by the bank There are several important factors to consider when assessing the appropriateness of an overdraft as a source of funding for SMEsThe amount borrowed should not exceed the agreed limit facilityThe amount of the facility made available is a matter for negotiation with the bankInterest is charged on the amount overdrawnat a rate that is above the Bank Base RateThe bank may also charge an overdraft facility feeOverdrafts are generally meant to cover shortterm
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