What is overdrafting and how can it help your business?

Figures from the Australian Securities and Investments Commission show that insufficient working capital was the leading cause of business failure in 2022-2023 (52%)¹.

So, what can organisations do to improve their access to short-term funds? This is where a business overdraft facility could assist.

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Understanding business overdrafts

Overdrafts are business facilities which give Businesses access to temporary credit that extends beyond the businesses available cash. Having an overdraft can assist with emergency expenses, late debtor payments, and other short term cash flow issues.

Business overdrafts have no fixed term, so you can access funds up to your credit limit whenever necessary, although you should be aware that interest and fees apply depending on your usage.

One of the biggest benefits of business overdrafts is the speed and availability with which you can access cash. IMB Bank’s overdraft facility enables you to withdraw funds via:

• An IMB Bank branch;
• An ATM;
• EFTPOS;
• Internet and phone banking; and
• Visa debit cards.

Choosing between secured and unsecured overdrafts

Business overdrafts are available as both secured and unsecured lending. An unsecured overdraft means that you do not need to provide an asset as security for the facility. On the other hand, secured overdrafts require you to commit a range of assets, such as residential, commercial and industrial property, as security for the facility.  

Each option has advantages and disadvantages. An unsecured overdraft exposes you and your business to less risk to your assets, but the amount of available credit will generally be smaller and the interest rate may be higher than what is offered for a secured overdraft.

Secured overdrafts allow you to access a much larger amount of credit. However, the lender will have the right to sell the assets you’ve put up as security if you’re unable to repay debts on your secured overdraft.

IMB Bank offers maximum unsecured business overdrafts of $20,000, while our secured overdraft facilities allow up to $500,000 - or more on a case-by-case basis.  

Taking the next steps

Finding the right overdraft facility for your business will depend on a range of factors, so it's important that you discuss your needs with a specialist adviser before making a decision. If you'd like to know more about IMB Bank's business overdraft services, please contact one of our relationship managers today.