Dropline Overdraft

Capital is a part of business that ensures all operations run smoothly. Business owners manage capital differently, wherein they either avoid credit or rely on business financing. 

The dropline overdraft facility is like the overdraft facility traditionally offered but there are a few points of distinction.

These are just a few of the numerous secured and unsecured credit options on offer, and they are designed to help you. However, you must do your due diligence as an uncalculated and uninformed credit can negatively impact the business’s growth. 

So, understanding what dropline OD is and how you can avail it is a good starting point. Read on to learn more about dropline overdraft, its features, benefits, and more.

Banks, NBFCs, and other financial institutions generally offer the dropline overdraft facility through your current account. You can avail dropline OD as an unsecured as well as secured credit. 

With this facility, you can get access to funds over your current account but only up to a certain amount. 

The limit is predetermined and gets reduced every month till the end of the tenure. Moreover, the financial institution will levy interest only on the amount you withdraw and not the entire limit. 

You can deposit money in your account whenever you want to restore your dropline overdraft limit.

There are numerous financial institutions that offer the facility of dropline overdraft. However, it is essential to choose the best one to ensure that you make a decision that keeps your finances secure. 

Some of the top financial institutions offering dropline OD include:

• Bajaj Finserv

• Kotak Mahindra Bank

• Yes Bank

• Aditya Birla Finance

• ICICI Bank

• SBI

• Axis Banks

• Tata Capital

• HDFC Bank

• RBL Bank

Be sure to check the terms of the financial institution to make a well-rounded decision. Some of the terms you should look at include, maximum limit, interest rate, tenure, processing fee, and other additional costs. 

Like eligibility, the documents required for availing this facility also varies depending on the institution you choose. These requirements may also vary depending on who applies for it (partnership, sole proprietorship, etc.). 

Given below is a general overview of documents required for dropline OD for different entities:

• For Private Limited Companies and Partnership Firms 

  1. Partnership deed, in case of partnership firms

  2. Incorporation certificate, in case of private limited companies

  3. GST returns for the previous year

  4. Bank statement for the account mentioned in balance sheet

  5. Statement of payment for existing loans, if applicable

• For Sole Proprietors and Self-Employed Professionals

  1. Financial statements for the past three years

  2. Audited ITR for the past three years

  3. GST returns for the past year

  4. Bank statements for the past year

  5. Existing loan information, if any

In addition to the above, you will have to submit the following documents to avail dropline overdraft facility:

• ID proof

• Proof of residence

• KYC documents

• Photographs, even of co-applicants

One of the best ways to determine whether the dropline overdraft facility is the right option is to look at the pros and cons along with your needs. Given below is tabular overview of the advantages and disadvantages of dropline OD:

Now that you know what a dropline overdraft loan is, choose your lender after careful assessment. This will help you choose an institution that offers a good credit limit at an affordable cost. 

Choose the right financing institution by assessing their reputation, interest rate, maximum limit, and tenure. These factors can help you determine how safe, secure, and affordable the credit is. This, in turn, keeps your finances intact allowing you to grow your business seamlessly.