APT Initiatives
APT Business & Economics Resources
Minimising Workloads, Maximising Performance
Established in 1999

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Arrangements between a business or individual and their bank or building society to withdraw more money from their account than that which is deposited in it, to an agreed limit. Interest is charged on any amounts overdrawn, usually between 2-4% over the bank’s base rate. Overdrafts are a common method of finance used by any type of business organisation. They are classed as short-term method of finance, used to fund working capital and seasonal peaks in demand, and for other bridging facilities. Many businesses (or individuals), however, operate permanently with an overdraft, provided the bank is happy with their credit history, and in the case of businesses, age and quality of debtors and stock, (the proceeds of which are used to pay back the overdraft).

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