Bank overdraft is the provision to the borrower Money, by crediting the bank to his current account within the established limit, in the event of insufficient or absent funds in the account, in order to pay for settlement documents. In simple words, a bank overdraft can be said this way: it is a short-term, constantly revolving loan that can be used by enterprises or entrepreneurs who periodically have temporary, short-term needs for additional funds to make payments.
Such a loan is automatically repaid by the bank from the resulting balance of the client’s funds in his account on the morning of each day. So, for example, on the first day the client was given an overdraft, during the next day money was credited to the account, and already on the morning of the third day the loan was repaid using the accumulated funds.
Features of overdraft lending. This type of lending has its own characteristics, which are as follows:
The borrower is obliged to fully repay the existing overdraft debt at least once a calendar month by crediting funds to his current account. In this case, on the repayment day, the borrower’s account is not credited;
Daily automatic loan repayment in the amount of the credit balance of the borrower's current account, which is formed at the end of each business day (after all transactions on the current account have been completed). There are no delays in payment of regular payments during the day;
Interest is calculated on the actual debt on the loan, which, with regular receipt of money, reduces the debt by the end of the day and saves interest costs.
Banks offer their clients the following types of overdraft:
1. standard overdraft (provided by the bank to the borrower within the established limit for the execution of the borrower’s payment orders and payment of expenses associated with their execution, as well as the borrower’s cash documents, despite the insufficiency or absence of funds in the account);
2. overdraft in advance (provided to a client who meets the bank’s requirements in order to return him for settlement and cash services to the bank);
3. overdraft for collection (provided to clients who meet the bank’s requirements and at least 75% of the turnover on the current account loan is comprised of collected cash proceeds (exactly deposited into the current account by the client himself)); 4. technical overdraft (provided to the client, without taking into account his financial condition, against payments made to the borrower’s account (sale or purchase of currency on the stock exchange, until the return of the term deposit or other guaranteed receipts to the client’s account)).
Overdraft conditions.
The requirements of different banks for clients when considering the possibility of providing an overdraft may differ. But the approximate conditions in all banks are almost identical and consist of the following requirements:1. The client must have at least one year of experience in the main activity;
2. Must have used the bank's settlement and cash services for the last 6 months, and have non-zero turnover on the current account (except for advance overdraft);
3. The minimum number of cash receipts to a bank account (or deposits of collected proceeds) must be at least 3 times a week (or 12 receipts per month), except for advance overdraft;
4. Do not have any unpaid claims or orders against your current account.
Submit to the bank a standard package of documents for consideration, as well as certificates from banks where the client has current accounts, about credit turnover for the last few months (at least 6-12 months), and certificates from banks where the client has current accounts, about the presence or absence of loan debts.
To obtain a technical overdraft, legal entities must submit an application for a technical overdraft, with detailed description transaction performed by the client, as a result of which he expects the receipt of funds to the current account (indicating the date of receipt). A copy of the agreement, payment orders, and other documents that reliably indicate the transaction specified in the application.
The overdraft limit for each legal entity is calculated individually using a special calculation method. Each type has its own method for calculating the limit. Methods for calculating overdraft in different banks may have their own distinctive features, but general principle does not change. The limits of standard overdraft, advance overdraft and collection overdraft are reviewed by banks on a monthly basis, taking into account changes in the client’s performance results.
To ensure compliance with the limit, every accountant can calculate the overdraft. And yet, to increase the amount of the overdraft limit, every accountant must be able to control the flow of money and revenue, avoiding single large payments. Maximum payments, if necessary, divided into several average ones.
Overdraft problems arising during the lending period:
Lack of experience in concentrating funds in a current account by a certain date, with the goal of fully repaying overdraft debt at least once a month. Failure to comply with this feature of the overdraft entails the withdrawal of the credit limit;
Inability to regulate cash flows, both by dates and amounts. This leads to a reduction in the overdraft limit or termination of lending;
Signing the first overdraft agreement, with the condition of transferring the entire cash flow to this bank, and not a certain part sufficient for lending can hinder the maneuverability of financial flows.
Most Russians know the concept of a loan, which cannot be said about overdraft. This is a special service that banks provide to debit card holders. In some cases, connecting this option becomes an alternative to lending.
What is overdraft
This service is available to both individuals and legal entities. As a rule, banks open a credit overdraft to salary card holders. This type of loan has many advantages if used wisely. Overdraft - what is it? in simple words? This is an opportunity to receive the missing funds to make a payment or pay for a purchase. For example, a client in a supermarket has purchased goods in an amount exceeding the balance of his funds. plastic card, but the bank allows him to “go into the red” and pay for everything.
Translated from in English the term overdraft means overspending of funds. The option is provided only after signing the corresponding agreement with the bank. As a rule, the limit on such a loan is small, as is the repayment period. Banks also provide clients with a grace period when interest is not charged for the use of borrowed funds (up to 30 days). After this, the debt increases at the consumer loan rate. The limit is calculated for clients individually, depending on income and other things.
Overdraft for legal entities
This type of lending is very beneficial for enterprises that have entered into an agreement with a financial institution for the collection of proceeds. Overdraft for legal entities- this is the excess of the cash balance when making expense transactions. For example, a company urgently needs to transfer money for a new supply of equipment, but the current account is missing some amount. The bank adds funds to make the payment, and then debits them back when the money arrives - along with interest.
The service is provided upon the client’s application by the bank in which the organization has an account. Overdraft lending helps legal entities maintain cash flow and pay bills on time. There are several types of this service:
- standard;
- advance (for reliable clients);
- for collection (with a turnover of collected revenue of at least 75%).
Technical overdraft
If the holder of a salary or classic debit card spends all of his money, going beyond the limit provided, an unauthorized overspending occurs. If the same conditions apply within the agreed loan, then for a technical overdraft you will have to pay interest that is increased several times. For example, for simple overspending, the rate is 18-20%, and for unauthorized overspending, up to 45-60% is charged. In this case, the debt should be repaid as soon as possible to avoid a fine.
An overdraft loan has a strict limit, but unauthorized overdraft can occur in the following cases:
- Payment with a ruble card for purchases in dollars or euros. When converting, the overdrawn amount may exceed the limit.
- Unconfirmed transactions. The client paid for one purchase with a card, after which the financial institution wrote off the funds for another transaction.
- Technical failure in the system.
Overdraft limit
The amount of funds recalculation may differ for each client, because the limit is set individually. The conditions are stipulated when drawing up the contract, when the holder of a salary or debit card decides to activate this option. The overdraft limit is set after consideration of the application, depending on the client’s income and the turnover of funds on the card. For example, Sberbank of Russia provides individuals with overspending in the amount of initially up to 30 thousand rubles, after which the limit may increase.
Overdraft interest
Typically, financial institutions provide for overpayments that are higher than for consumer programs. What overdraft interest will be set depends on the tariffs of a particular bank. If you are late in paying your debt, additional fees will apply. The approximate rate for this type of lending is 15-25% depending on the financial institution. In addition, overexpenditure has a limited period - no more than 12 months.
What is an overdraft at a bank?
Modern financial organizations offer the population various types of lending to attract customers. A bank overdraft is an opportunity to spend more money than an individual or business has in their account. When funds are received, debt and interest are written off. Each financial institution offers its own conditions. Salary and debit cards with overdraft can be issued at Sberbank, VTB 24 and other large banks in the country.
When connecting to the service, the lender sets a limit on overspending. You can use it an unlimited number of times, since the line is renewed constantly after the debt and accrued interest are written off. If desired, the service can be disabled by submitting a corresponding application to a branch of the financial institution.
What is an overdraft at Sberbank
This financial institution provides the opportunity for private clients and businesses to overspend money on current accounts when connecting to the appropriate service. Thanks to this, if you don’t have enough credit on your card, you can pay for a purchase, and the debt will be written off automatically when credited. The most attractive conditions are available to individuals and legal entities who have a large turnover of funds on cards and accounts.
You can connect such a loan in rubles, dollars, euros. However, there are differences in interest rates: 18% ( National currency), 16% (foreign). An overdraft at Sberbank for individuals is opened with an average limit of 30 thousand rubles. Specific figures are calculated by a financial institution's credit expert, analyzing the client's solvency. It is important to pay off the debt no later than two months after it was incurred.
Overdraft VTB 24
All owners of salary and debit cards, which regularly receive income, can apply for this service. Overdraft VTB 24 is opened for an amount of at least 10-15 thousand rubles. The maximum amount of overspending is set individually, taking into account the client's solvency. If a corresponding agreement was previously concluded, then a loan in case of overspending will be allowed - with a tariff of 20%. Technical or unauthorized - an undesirable phenomenon in which the bank charges 50% and late fees.
Alfa Bank overdraft – conditions
This financial institution provides the opportunity to “go into the red” for debit card holders and corporate clients with a good credit history. Fast processing with a minimum package of papers is what Alfa Bank offers; an overdraft is opened in the amount of up to 6 million rubles (advance) and up to 10 million rubles (personal offers). The loan rate is calculated taking into account many factors and is 13-14%. It is worth noting that for connecting the service the bank charges a commission of at least 10 thousand rubles (1% of the limit).
Video: overdraft card
The term overdraft for legal entities is widely used in the banking industry.
Any entrepreneur, enterprise intending to use a loan for their economic activity It is extremely important to have a clear understanding of all the intricacies of this financial and legal term.
What it is
Overdraft is the excess of the client's expenses over the balance of funds in his bank account. The deposit can be regular, or in the form credit card. The client can be an individual or legal entity. The definition of the term from a legal point of view is given in.
A legal entity can receive this service by directly concluding an agreement with the servicing bank, which contains a description of the procedure for using a current account. For example, counterparties can freely transfer money to it, and the client himself can pay his expenses even when the account limit is exceeded.
Overdraft is a bank service; it is not provided without an appropriate agreement.
The overdraft amount is always limited to a certain amount. The client can freely transfer funds to other accounts until the overdraft amount is exhausted.
With any receipt of money into the current account, they first go to repay the overdraft, taking into account the interest that is determined by the terms of the agreement for the use of borrowed funds. For any legal entity, the overdraft service is a matter of convenience, since any invoice issued by the counterparty can be paid on time, avoiding delays in fulfilling the obligation.
There are several types of overdraft for legal entities:
- standard;
- in advance (only for clients with an impeccable reputation);
- for collection (for clients with a current account loan turnover of 75% of collected revenue and above);
- technical (against already registered and guaranteed receipts to the client’s current account from his partners, allowed).
In each case, depending on the specific type of business (services, trade, etc.), the bank client is provided with the type of overdraft that is optimal for both parties. The lender always guards its interests, and therefore strives to offer the legal entity the least risky option.
Lending terms
According to standard scheme overdraft is provided to legal entities on a contractual basis for a period of up to 1 year. The maximum borrowing amount for each client is determined individually, and can reach 70% of the average turnover on the current account.
The loan is repaid every day. And it is carried out automatically from any funds received into the borrower’s current account until the overdraft is closed.
There are two types of lending for legal entities:
- without collateral;
- with collateral.
The first type is also called blank, and the second - with collateral. A client with an excellent credit history can get a blank loan from this bank.
The interest rate for using borrowed funds directly depends on the borrowing period. Typically, for short periods (up to 1 month), the interest rate is low, but if it is exceeded, it rapidly increases several times.
In addition to interest on the loan, the bank may charge various fees:
- for consideration of the application;
- for opening an account;
- for conducting personal business;
- for support of the loan provided, etc. (clause 1).
This is why it is important to carefully study the full text of the contract, since a simple rate may not fully reflect the true picture. The range of bets depends on the type of currency.
Foreign companies charge much lower fees than domestic banking organizations. If a loan is provided on the security of real estate, then such a loan agreement is subject to mandatory registration.
Requirements for borrowers
The final list of requirements for the borrower is determined individually by the credit institution that provides the loan. However, it is worth recognizing that there are General requirements, recognized by all lenders as important and binding.
These include:
- Providing reliable information about the turnover of a legal entity for a certain reporting period (for six months, a year).
- Opening a current account with this bank for an amount equal to or greater than the overdraft limit (secured loan).
- When opening an account without collateral, it is created no less than six months before the expected date of opening the overdraft. All this time, the future borrower demonstrates the stability of his financial situation. In particular, funds must be received into the current account at least 12 times a month.
- The total work experience in this area of the legal entity must be more than 1 year.
- At the time of opening an overdraft, the client should not have any unpaid orders or claims on his current account.
What amount should you expect?
The amount that a bank can provide a legal entity with an overdraft depends on what type of loan is chosen in this case. Standard overdraft is provided to businesses to pay their expenses without regard to the status of their deposit.
The limit in this case is calculated as follows:
Limit = T/2
T is the standard designation for small truncated monthly credit turnover. To calculate it, a standard method is used: in each of the last 3 months, the 3 maximum credits to the current account are selected (loans are not taken into account), and then the month with the lowest turnover is taken as the reference.
Advance overdraft - it is provided to trustworthy bank clients in order to enter into agreements with them for settlement and cash services in the future.
The formula for calculating the limit in this case looks like this:
Limit = T(a) / 3
T (a) - small truncated monthly credit turnover, minus loan payments paid by the client and interest on them.
It is calculated like this:
- within 3 months, 3 maximum credits to the current account are deducted from the monthly credit turnover, excluding loans taken and receipts from accounts in other banks
- then, from these three months, choose the one where the amount was the smallest;
- From this amount, future payments on borrowings and interest on them are deducted for 2 months in advance.
An application for an overdraft is submitted by the organization and considered by the lender within 30 calendar days. Only after this the potential borrower is officially notified of the decision made.
Overdraft for collection - it is given only to those companies that fully satisfy all the requirements of a given banking organization and receive more than 3/4 of their turnover on the loan of a given current account from collected foreign currency earnings.
The formula for the overdraft limit for collection is calculated as follows:
Limit = I / 1.5.
I is the small monthly volume of cash of the enterprise, calculated as follows: for 3 months, 3 maximum deposits in foreign currency are subtracted from the monthly cash volume, and then the smallest month is selected and taken as the settlement month.
Technical overdraft - can be provided to an organization without taking into account its actual financial condition. In this case, the bank’s confidence is gained by already registered receipts into the account, with a high degree of liquidity.
The formula for calculating the limit looks like this:
Limit = 0.95 x Su x K or Limit = 0.95 x S., where:
- Su is the amount in foreign currency, which the company sent for conversion into rubles in this bank;
- K is the exchange rate of a given currency on the date of the money transfer;
- S is the amount of guaranteed credits to a legal entity’s deposit in a given bank in the next 3 business days.
As soon as the expected receipt is actually credited, the overdraft is locked.
Interest rates
There is no single methodology for calculating interest rates for using an overdraft that is used as a basis by all credit institutions. Everyone is free, at their own discretion, to set maximum rates for using an overdraft, for violating repayment deadlines, for exceeding the limit, etc. (Clause 1 of Article 809 of the Civil Code of the Russian Federation).
In each specific case, the financial condition of the company, its reliability, and whether the potential borrower provides cash and settlement services and collection services are taken into account in this bank. The more crystalline the credit history, the more preferential terms a future borrower can count on.
Competition is a limiting factor. Any organization has the right to change its service bank, if it is not satisfied with the proposed interest rate, or contact another financial organization with more favorable conditions.
This is the main reason why the fee for using borrowed funds in most Russian banks is slightly higher than the key rate of the Central Bank during the grace period (30 days), and then rises to 20%. Interest on the loan amount is charged daily until the loan is repaid, and they can also be charged for (Clause 4 of Article 809 of the Civil Code of the Russian Federation).
Registration time
A potential borrower does not always know exactly when he may need an overdraft service. Financially stable enterprises are much more likely to issue targeted loans under certain conditions, choosing one bank or another based on their financial considerations.
But there are also those who prefer to draw up an agreement in advance. In this case, in order to receive the most favorable offer, the company purposefully demonstrates its financial solvency for a period of 3 to 6 months. All this time, the lender evaluates the amount of income and, based on these actual data, calculates the limit on the loan using the formula.
The processing time for an application if applied in advance is 3-6 months.
Then the bank makes a decision and officially notifies the future borrower about it. But in some cases, a legal entity can receive a loan in a shorter period of time. For example, an application can be satisfied in just 3-4 business days, but finalizing the contract will still take a lot of time.
Usually with overdraft amounts up to 6 million rubles, bankers prefer not to closely study the financial indicators of a particular business, trusting money at slightly higher interest rates. In special cases, the lender may go for .
Package of documents
Banks are very attentive to checking the reliability of their future borrowers.
For this reason, the package of documents required to obtain an overdraft for a legal entity consists of three large groups of papers:
- Identification of the manager or authorized person: application in the bank form, copies of management passports with the rights to affix the first and second signatures, TIN.
- Constituent: certificate of state registration, charter.
- Financial: information from other organizations where the client has current accounts about the presence or absence of debts, the size of turnover, and loans.
- Bank offers
Domestic banks are ready to lend money to businessmen in the form of an overdraft, and each offers its own conditions. From the table above it is clear that the leader of the market is Sberbank, since the commercial offers of others are forced to compete with it.
Table. Conditions for providing ruble loans to legal entities as of July 2019.
| Name of the bank | Bid, % | Limit, rub. | Max. term |
| Sberbank | 12,73% | 17 000 000 | 12 months |
| Gazprombank | 12% | At the discretion of the bank | 14 days |
| VTB 24 | 11% | Up to 50% of the turnover on client accounts | 12 months |
| Rosselkhozbank | * | 10 000 000 | 12 months |
| FC Otkritie | * | Up to 50% of average monthly credit turnover on a bank account | 12 months |
| Alfa Bank | 15% | Up to 10,000,000 | 12 months |
| Promsvyazbank | * | up to 50% of the average monthly turnover on the current account for the last 6 months | 12 months |
| Raffisenbank | From 17% | for existing bank clients is up to 1.2 million rubles, and for clients who do not have a bank account, up to 900,000 rubles. | 12 months |
*- interest rate is determined individually.
Advantages and pitfalls of overdraft for legal entities
Among the pitfalls awaiting newcomers in the field of using overdraft for legal entities, the following can be listed:
- Without proper experience in accumulating the necessary funds in a current account by the reporting date, you may encounter the fact that the limit will be withdrawn or significantly reduced. For this reason, it is extremely important to clearly understand how stable the real state of affairs in the company is and how financially stable the most important and largest counterparties are.
- The bank that issued an overdraft to a legal entity may require that before the debt is repaid, all money received during this period must be credited to the client’s account, even if the receipts significantly exceed the overdraft limit. For a company, this can become a significant limiting factor that does not allow it to freely dispose of incoming money from business partners.
The unconditional advantages of an overdraft for legal entities include:
- A simple application and registration mechanism, especially for those companies that are serviced by this bank and have already managed to fully demonstrate their financial stability.
- The ability to quickly obtain the necessary funds for business development when cash is insufficient.
- Acceleration of mutual settlements with counterparties when receipts from buyers and consumers of services are delayed.
- The ability to use only part of the limit provided by the bank in order to minimize overhead costs for paying interest on borrowed funds.
The main danger facing businessmen who decide to use an overdraft is overestimating their own capabilities. Only sober calculation can help you avoid falling into a debt trap.
It is no coincidence that banks prefer to monitor for a long time (up to 6 months) how regularly and in what amounts money is received into the current account of a potential borrower. And only after careful calculations is the maximum amount that a bank with moderate risk can provide to a client for a short period of time is determined.
From a business point of view, overdraft is an index of the bank's reliability and trust in a particular client. The more clients a particular organization has, the higher its income. The ability to offer potential borrowers an overdraft service dramatically increases loyalty to this credit institution in financial circles.
Currently, there is a tendency to reduce interest rates in Russian banks for using an overdraft for individuals and legal entities.
Getting approval for this service has never been easier. It is beneficial for bankers to offer an overdraft to large clients, since this automatically means opening a current account, which means that even a businessman who has not used the offered service will pay for the service.
Video: What is an overdraft limit for legal entities - 2.
One of the types of bank lending, which involves the client using a larger amount than he has in his current account. In other words, a credit institution carries out an order from a legal entity to use money subject to a certain limit. The overdraft amount is calculated taking into account the receipt of funds into the account over the last 2-3 months. At the same time, the “depth” of the loan rarely exceeds 40-50% of the average parameter.
Overdraft for legal entities: types
Financial institutions are increasingly using overdrafts as a tool for lending to small businesses. Providing such a service allows you to solve several problems - attract customers, provide them with credit money and receive additional profit.
Wherein there is an overdraft for legal entities :
- Advansov. The main feature is the preliminary calculation of restrictions and announcement of services in order to attract legal entities to use the service.
- Collection. Here, when calculating the limit, the reference point is the funds that are subject to collection. The bank calculates the average for several months, after which it provides a loan for 60-70% of the calculated parameter.
- Technical. The peculiarity of a technical overdraft is that the service is provided after checking the client’s solvency. This type of small business lending works with guarantees from the borrower (for future purchase/sale of currency, return of deposit, and so on).
Read also -
Overdraft characteristics
As with a regular loan, overdraft for legal entities has a number of characteristics :
- Size (amount). This indicator means a limit that is set by a credit institution in relation to a client (taking into account the terms of the agreement). The size of the overdraft for legal entities depends on the amount of funds received into the current account. In this case, the credit institution is more interested in net profit, which does not include income from sales valuable papers, as well as replenishing the company account. Each financial institution has an individual limit. In this case, the standard range is at the level of 30-50 percent of the average income per account.
- Overdraft period for legal entities is conditionally divided into two categories:
- According to the terms of the agreement. This could be six months or a year.
- The maximum period during which the debt can be repaid. Here the period may be lower - from a month or more.
- Overdraft rate for legal entities. The parameter is set individually and depends on the turnover on the legal entity’s account. The rate may vary depending on a number of factors:
- Type of collateral.
- Volume of working capital.
- Tariff plan and other parameters.
What are the advantages?
Overdraft for legal entities is in high demand for the following reasons :
- Pledge can be accepted in any form.
- After transferring the papers to the credit institution, the money is available for use.
- As your turnover increases, you can count on an increase in your overdraft limit.
- Debt repayment occurs automatically. When funds are received on the account, they are written off in favor of the existing debt.
- Interest is charged on the remaining balance of the loan.
The main disadvantage for many is instability overdraft rates. After concluding an agreement with a legal entity, the bank has the right to unilaterally change tariffs (with notification to the client or to do it independently). In addition, if violations on the part of the client are detected, the contract may be terminated altogether.
Rates
Overdraft for legal entities- a convenient tool for lending to small businesses. Its advantage is that the service is activated only when needed. Interest for the use of credit funds is calculated based on the results of the month or other agreed period.
Overdraft conditions for legal entities vary from bank to bank :
To receive the service you need:
- Contacting the bank, clarifying the list of documents and rates.
- Filling out the form and submitting the required package of papers.
- Conducting an analysis of the company and making a decision on the provision of services.
To sign up for the service, you must:
- Fill out the application online.
- Submit the required package of papers.
- Find out the rates for legal entities and the current limit.
The issue of small business lending is especially hotly debated. In its turn, overdraft for legal entities- one of the ways to quickly solve financial problems.