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Overdraft accounts

Get access to extra cash when you need it the most.

Overdraft accounts in Singapore are designed to provide business owners with cash flow relief when they need it the most. Read on to find out more about overdraft accounts in Singapore, including their features and requirements.

What is a business overdraft?

A business overdraft is a revolving line of credit businesses can access when they need funds. This comes in especially handy when you’re waiting for client payments but required to make expenses at the same time (e.g. paying employees or vendors).

A business overdraft is a helpful tool for plenty of businesses, as it provides business owners with the confidence that they have enough cash on hand to cover short-term expenses. A business overdraft can also be used to expand your business or help you negotiate better deals on purchases by allowing you to afford larger upfront purchases.

How do overdraft accounts in Singapore work?

Overdraft accounts in Singapore are typically linked to the business transaction account you hold with your financial provider. Business overdrafts are available in a secured or unsecured form and with fixed or variable interest rates. There is typically no minimum or maximum term and you can customise a flexible repayment schedule to suit your business’s needs.

What are the types of overdraft accounts in Singapore?

  • Secured loan. A secured loan requires an asset to be offered as security for the loan, which reduces the risk a lender faces by providing you with funds. As a result, you can enjoy lower interest rates than on an unsecured loan and sometimes be charged lower fees.
  • Unsecured loan. An unsecured loan does not require you to offer anything as security. Therefore you can typically expect higher interest rates and fees than on a secured loan because you pose a higher risk to lenders.

How do I compare overdraft accounts in Singapore?

  • Secured or unsecured. Do you want to offer an asset as security for your loan or not?
  • Interest rate. The lower the interest rate, the less you’ll have to pay in interest charges on the amount you spend. You can also choose between the security of a fixed rate and the potential savings possibilities a variable rate offers.
  • Fees. Make sure to look at the fees and charges attached to every competing business overdraft. Look for application fees, annual fees and any other ongoing fees.
  • Repayment options. What repayment options does your business overdraft offer? Do you need to stick to a rigid repayment plan or is there any flexibility built in? Look for an overdraft that lets you tailor repayments to suit your budget.
  • Loan term. Some business overdrafts don’t feature any minimum or maximum loan term at all, while others will require you to pay the loan off over a period of at least 12 months. Make sure to check the term on each business overdraft you are considering.

      Pros and cons of overdraft accounts in Singapore

      Pros

      • Extra security. A business overdraft gives you the peace of mind of knowing you can access funds when you need them.
      • Flexible repayments. Overdrafts allow you to pay off the amount you can, whenever you can—with no fixed repayment schedule—as long as you stay under an agreed limit on your account.
      • Many uses. You can use the funds in your overdraft account for many purposes, ranging from paying suppliers to looking to expand your business.

              Cons

              • Higher fees. Overdrafts in Singapore tend to carry higher charges and fees than some other types of business loans.

              Things to note before applying for an overdraft account in Singapore

              As business overdrafts tend to attract higher interest rates and fees than other lending products, you need to be wary of getting into too much debt. It’s also vital to familiarise yourself with all the fees and charges attached to an overdraft before signing up.

              Another common issue is that many products allow the lender to recall the overdraft at any time. This can be highly inconvenient for business owners.

              Business bank accounts that come with the option of an overdraft

              In order to apply for a business overdraft in Singapore, you’ll need to have a business bank account to link the overdraft facility.

              There is a range of accounts out there which come with the option of an overdraft facility. Once you’ve opened the bank account, depending on the size of the overdraft and the type of entity your business is, you can apply and get approved for the overdraft online and link it to your account to start accessing the funds.

              Frequently asked questions

              • Do I need to offer an asset as security? Not necessarily. Business overdrafts are available in secured and unsecured form.
              • What is the purpose of a business overdraft? Overdrafts are designed to help you manage business cash flow, offering quick access to funds when you need them.
              • What can I use the funds for? This is up to you. You might wish to use the funds to pay urgent expenses, expand your business or even negotiate better deals with suppliers.

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