Merchant Overdraft

Merchant Overdraft or overdraft facility is best suited for frequent cash inflow. Businesses typically need money to avail cash discounts by paying upfront or on time, extend credit to customers, pay off vendors or meet seasonal demands. Unsecured Merchant Overdraft Loans from Equitas are the best solutions for these needs.

Facility Amount

Get loan 1 lakh to 2 lakhs

One Approval

One time approval for usage upto 12 months

Always Balanced

Pay for as much as you use

Processing Fee

We only charge 2% processing fee

How To Avail Overdraft Facility

MSMEs that meet the following criteria are eligible for ‘Merchant Overdraft’

Eligibility For Overdraft Facility


  • Minimum 3 years of Proprietorship/Partnership business
  • Owned premise
  • Minimum Turnover of INR 5 lakhs per year

Required Documents For Overdraft Facility


  • Business Registration Proof
  • KYC documents
  • Property ownership document
  • Bank statement

What Is An Overdraft Facility:

The term ‘Overdraft Facility’ refers to a tool through which you can withdraw money from your current or savings account despite zero balance in your bank account. Every bank & non – banking financial company offers this amazing facility to its customers. Overdraft facility is a kind of short term loan which is to be repaid by the customers within the assigned time frame.

In accordance with the financial institution’s terms and conditions, creditors may collect interest rates that the debtor is required to pay back. The interest rates offered by creditors are fixed and not fluctuating.

How To Apply For Overdraft Facility

  • Taking extra money from the financial institutions (using the overdraft facility) is similar to taking a loan from the bank. In order to avail of the overdraft facility, some clients have to take approval by the creditor.

  • The overdraft facility is robotically turned on when permitted clients take out additional money from their bank account and the balance in their account becomes negative. However, the clients who take authorization from the creditors have to submit a request for it. They can submit the form by applying it though application form on website as well.

  • An Overdraft Facility in which security is mortgaged is contemplated to be secured overdraft. In contrast, an overdraft facility that is taken in opposition to a bank account is contemplated to be an unsecured overdraft facility.

  • When you borrow a business loan from your bank, you will get the amount sent straight to your account. Similarly, when your account is authorized from the bank for the same then you’ll be given an applied overdraft amount or overdraft loan.

  • In case, you require money immediately and you are already permitted for the overdraft facility then when you will be able to withdraw money from your account. “It will go directly in your bank account. Still, you can only withdraw money up to the approved Merchant Overdraft.”

  • You have to pay interest to your bank from the time you have received an approved overdraft amount.

  • As the debtor’s ledger can change on a daily basis so the amount you have borrowed requires to be estimated on a regular basis. The debtor can pay back the overdraft amount without giving prior information to the bank.

Overdrafts Facility Characteristics

  • Overdraft amount is offered for an approved limit and this can be diverse for each debtor.

  • Interest Rate is estimated on a regular basis and is charged on the overdraft amount used by the debtor.

  • There are no prepaying fees you have to pay to the bank. If you want to pay back the overdraft amount before the time limit then you can pay it altogether.

  • It has no minimum repayment on a monthly basis but the amount you use must not exceed the Merchant Overdraft and also do not delay your repayment of overdraft amount otherwise it will have an effect on your credit history.

  • It offers flexibility of repayment. You can pay back whenever you want to!

So, anyone can avail it on the basis of secured or unsecured overdrafts. The debtor can be self-employed, individual person, SMEs who take small business lines of credit loan.

FAQ Related to Merchant Overdraft

  • Which are the domains of business which are offered a Merchant Overdraft?
  • The Merchant Overdraft is specifically designed for businesses that lie in the category of traders, retailers, service providers, etc.

  • How is a Merchant Overdraft different from a loan?
  • Merchant Overdraft is an extension of an overdraft (OD) facility wherein the bank assigns a limit under which the borrower can withdraw. While a loan is granted one-time based on the borrower’s profile, it is a non-revolving credit facility, unlike a Merchant Overdraft. Also, a loan has a fixed amortisation schedule with a fixed or floating interest rate.

  • What are some of the differences between an overdraft facility and a Merchant Overdraft facility?
  • Merchant Overdraft facility has a pre-sanctioned limit, beyond which a corporate borrower cannot go. This is unlike an overdraft facility, wherein the borrower is allowed to withdraw funds over and above his account balance. In a nutshell, a Merchant Overdraft is a subset of an overdraft facility.

  • Is a letter of credit and Merchant Overdraft the same?
  • Letter of credit (LC) is a product in trade finance wherein the bank or the financial institution gives a guarantee to the seller’s bank in that trade. This guarantee means that if the buyer fails to pay the seller, then the LC issuing bank will make the complete payment. However, the Merchant Overdraft is a funds withdrawing facility, in which the borrower can withdraw money within the pre-agreed sanctioned limit.

  • How the repayment of the Merchant Overdraft works? Can a borrower repay it anytime he wants?
  • As a corporate borrower who has used the Merchant Overdraft facility, now is the time for repayment. It is ideally advised by money managers and financial advisors to repay the amount withdrawn as soon as possible and don’t delay it unless necessary. This is because the interest charged will be lesser when you repay it early, thereby decreasing the total interest outgo.

Charges

Mean rate and Interest rate range for the quarter Apr 2022 – Jun 2022
Segment Mean interest rate Interest rate range
Min Rate (in %) p.a. Max Rate (in %) p.a.
Merchant Overdraft 21.00% 21.00% 21.00%
• Mean rate = Sum of rate of interest of all loan accounts / Number of all loan accounts.

Annualised Percentage Return (APR) for the quarter Apr 2022 – Jun 2022
Segment Min Rate (in %) Max Rate (in %)
Merchant Overdraft 23.00% 23.00%

Merchant Overdraft
Type of Loan Segment Effective Rate Of Interest (p.a.) linked to External Benchmark Rate
Floating Merchant Overdraft – Upto 2 lakhs 21.00%

* Market Linked Benchmark (MLB): External Benchmark Rate is arrived based on Repo Rate published by RBI. Rate is published at https://rbi.org.in/home.aspx