If to speak with not professional language accessible to everyone person the overdraft is a category of credit at which the borrower (bank customer) has possibility to remove from the settlement account more money than he has. That is the difference between those money funds that were on yours to the account and which you have removed and the credit given to you by bank. Usual overdraft for juridical bodies is established for the term up to one year, but with prolongation possibility, all depends on reliability of the legal entity.
Loan repayment occurs thus: at receipt of any means for the account of the borrower, all money is completely written off until the credit completely won’t be repaid yet. For regular customers there are privileges in the form of a grace period of use of an overdraft during which period percent aren’t charged. The main reason on which the overdraft for juridical persons is rather demanded credit product is a lack of means for payment of settlement documents.
The overdraft cap settles payments for each client (legal entity) individually. As there are some kinds of an overdraft therefore also there are some procedures for it.
We are obliged for creation of an overdraft to William Hog, to whom was permitted to take in 1728 for 1000 pounds sterling (and now it is almost 65000 pounds sterling) more than was available on its settlement account. Since then the bank has realized that it is favorable to give overdrafts under percent both physical, and to juridical bodies.
There are 4 kinds of an overdraft:
Advanced — it is given (basically to financially stable clients)
Under collection – it is represented to legal bodies, 75 % from which settlement account are constituted by collected monetary revenue (that is the revenue which has been handed over on the settlement account by the client).
Technical – at registration of this overdraft the financial condition of the client isn’t considered, arranged under a guarantee of transfer of money for the account of the borrower.
Conditions of opening of overdraft:
Requirements of different banks to clients, at the analysis of probability of granting of an overdraft can differ. However the most important conditions are such:
The borrower should work on present work not less than 1 year, and mark frequent monetary receipts from this type of activity on the settlement account;
The client is obliged to use cash servicing of the given bank within last half-year;
The borrower has the account in this bank.
While opening of overdraft for juridical persons bank specifies period of validity, periodicity of revision of an overdraft cap, term of continuous using an overdraft and crediting currency. All it is determined by consideration of a financial condition of the borrower and quantity of receipts of revenue on the current account.
The mandatory condition of overdraft reception is absence of open credit business in this or other bank. To avoid probability of means non return received by means of an overdraft bank pledge in which quality can be demands: real estate, motor transport, the equipment, finished product, guarantees of the third parties. Also provision under the given credit to an overdraft can be combined.
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