One of the most common business lending options is the bank overdraft. It’s flexible and can be used when required, making it the safety net for many small businesses. As your business grows, so does your dependency on your bank overdraft. And more often than not, this leads you to outgrowing your facility as you trade with larger customers and deal with more frequent orders.
So how can you secure the additional funding which you require? Below are a few tips on how to increase your bank overdraft limit.
Is a bank overdraft the best option?
Before you consider increasing your current bank overdraft, is it the best business lending option for you? There are various methods of funding which may suit your needs better. For instance, invoice finance utilises the cash you are yet to receive within unpaid invoices. Using this method, many companies remove the dependency of their overdraft as they are able to receive cash on day one of raising an invoice instead of having to wait 30, 60 or even 90 days before the customer pays.
Asset finance is also another option if your cash need is based on a one off investment. For instance, you may want to purchase new machinery, new vehicle/s or property. Asset finance will use the asset as security as you pay monthly for the asset instead of having to find a lump sum up front.
Ask your bank for a limit increase
If you have decided that the alternative funding options are not right for you, the best way to get an increase in your overdraft limit is to have an honest conversation with your bank manager. Be open about your cash flow forecasts; get your accountant involved if possible and ask what is required to extend your overdraft. The minute you mislead your bank, the relationship will begin to breakdown. This loss of trust will restrict your chances of increasing your limit dramatically.
Another simple tip is to ask for more than you require. If you are after a £5,000 facility, ask for £10,000 and the bank manager may “compromise” at £5,000.
Consider the switch
If your current bank is not willing to extend your overdraft, take the plunge and approach other banks. You may get the increased limit you need whilst also benefitting from newcomer rates. Again, your accountant will be a big help in switching over smoothly.
Ask an expert about your options
If you have a cash need, asking an expert for guidance may open up alternatives you have previously overlooked. To speak to a cash flow funding expert, fill in this call back form for free guidance about your business funding alternatives.