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Overdraft facility

An overdraft facility is credit in the form of a limit which is linked to a company’s account. It is particularly well-suited to companies' short-term and seasonally fluctuating needs for working capital.

Benefits for your business

Credit limit means that the bank and its corporate customer agree on a limit up to which the company can flexibly use the credit according to its needs. 

  • An overdraft facility is a handy solution for cash management and leveling off of seasonal variations, for example.
  • You can also use it for preparing for unexpected expenses in your business.
  • If you wish, you can link the overdraft facility to your Nordea payment account.
  • Credit interest is only charged on the used amount of the facility, and a separately determined limit interest rate is only applied to the entire limit.
  • You can apply for a guarantee from Finnvera for the overdraft facility.

Features of a credit limit

A payment account is the basis of a company’s cash management. If needed, an overdraft facility that suits your company’s needs can be added to it. The overdraft facility may be used up to the agreed credit limit,

and it is an opportune means of preparing for seasonal variations or unexpected expenses. For instance, if your company’s business is slow during the summer months, the overdraft facility may help in levelling off the seasonal variations. It could also come in handy if you're faced with unexpected expenditure because of a breakdown in your manufacturing equipment.

The credit limit principles are simple. Once you have agreed on the credit limit, interest rates and other terms and conditions with the bank, you can use the credit for your company’s needs up to the ceiling of the limit.

After using some of the credit, you can use the difference between the credit limit agreed on and the credit spent. When your customers make payments to your account, the credit amount spent will decrease. For example, if the credit limit is EUR 10,000 and you spend EUR 3,000 of the credit, you still have EUR 7,000 available. 

All payments made to the account will automatically reduce the amount of credit spent so that the repaid amount will be available to you later. If we take the above example further,let's assume a payment of EUR 5,000 is credited to your account. This payment will be used to pay the EUR 3,000 of credit spent, after which the credit will be again available to you in full. 

The credit limit pricing is simple, as it is composed of the following two elements:

  • credit interest determined according to the limit used, and      
  • limit interest, charged on the entire amount of the overdraft facility.

Let's go back to the example above for a while. When you have withdrawn EUR 3,000 from the limit, the credit interest will be calculated on the basis of this amount up to the date on which you either repay the credit or withdraw more credit. Limit interest is charged on the entire limit regardless of how large a share your company has used of the credit.

Want to apply for overdraft facility?

You can apply easily online

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