Considering this is a business forum all the members here are clever well organized businessmen with business plans in place , use their overdrafts the way they are designed to be used etc etc.
However there are a few of us who shouldn't be businessmen because we didn't open our business to be become businessman rather tradesman who felt they could do it on their own and get rich. I might just be talking about myself, anyway back to the topic.
So you go bank you don't have a business plan etc etc but you "need" a little extra money for a project. You have been running your business for longer than 6 months so the bank has a profile on your account and there has been X amount of turnover ( FNB I was told will only consider it after 12 months unless you have some form of surety). They are prepared to talk.
This is my take on overdrafts and credit limits, this is why I made the comment earlier, I don't manage credit limits and overdrafts very well. I would rather have a zero or very low credit or overdraft limit on my accounts than a huge amount which I can never afford to get out of. I would rather take loan and pay it back than sit with the expense of having to pay fees and interest on an amount for the rest of my business life. The other big issue I have and got properly caught with is when you have a couple bad months, that interest can bite you lekker . To top it all if you just don't get through that rough patch now suddenly you have this huge amount to pay up before you can move forward.
I know you fellas all manage your account properly and don't have this type issue but for some of us less mature tradesman like to spend rather than save. I know I should get my knuckles smacked for being naughty, unfortunately it is a reality for me.
So what do I do take a 100 grand loan to finance a job or increase my overdraft by 100 grand then sit with that interest for years to come, because I think like a fool when it comes to money.
I am at that point right now were I either need to increase my overdraft or take a loan or sell something to feed my family, not because I haven't been working but because I jumped into a fair size project which was worth my whole years turnover, finished the project without taking into consideration what if ...I don't get paid on time.
This is were I believe many small contractors fail, we get busy, lots of work comes our way, we grab it with both hands and "trust" people. The company then uses you to finance their lifestyle or keep their company going while you sit as the last person in the payment chain begging for your money.
The catch is you need to keep going so this is were overdrafts credit limits are stretched to the max and you make or break, unfortunately more break than make.
Anyway you look at it as soon as you go into the red no matter what you decide overdraft or loan you need to be aware that it could be the breaking point of your business. The more credit you get, the longer it takes to finish you off. With a less than 50 % ( just a figue...not sure of the exact figue off hand)chance of survival in SA it is quite a gamble.