SMEs Prefer Overdrafts to Loans
More small-business owners are using bank overdrafts rather than loans to finance their firms during the recession, according to credit reference agency Creditpal. A Creditpal survey of 540 small businesses found that 30% had applied for an overdraft or overdraft extension during the past two years, while just 21% had applied for a bank loan, despite business loans being a much cheaper form of debt finance. “Many small firms have chosen to stick with their current bank for overdraft facilities, rather than try to approach a new lender for a loan,” said Creditpal chief executive, Chris Poll. “Overdrafts are obviously a fast and effective means of extending finance and businesses shouldn’t avoid them automatically if they are suitable for their needs. But the rates of... »
