Overdraft or loan

[wynn]

I am in the middle of a situation, OK my credit at certain suppliers is temporarily curtailed, but I am surviving.

In May I supplied a large amount of material to a contractor with a direct cession with the client Municipality in place, should be easy right?
Not so, the contractor does not have secure storage at the job site so he is keeping all the materials at his own workshop till he needs them, so far so good, the consultant will only issue a payment certificate for material on site, so payment will be a long time coming, but it will come eventually.

In the mean time I have told all my suppliers that they will be paid when I get paid or before if I get some extra liquidity on hand, this happened yesterday and I managed to pay one of the suppliers what I owed him.

Now had I been using an overdraft facility and gone into the same situation after three months the bank would have closed my facility and the money I earned yesterday would have just gone into a bottomless pit and I would have been in the same situation as before except that now I wouldn't have a facility and the bank would be twitching every time I wanted to withdraw funds.

So my advice, make your suppliers carry the amount owed, the new rules mean they have to carry on with your original credit agreement after you pay them back so effectively you get an interest free loan to bide you over the lean time, OK the temporary credit squeeze is sometimes hard to bear but infinitely better than dealing with a bank who have whole departments just to make your life difficult.

[Justloadit]

Now had I been using an overdraft facility and gone into the same situation after three months the bank would have closed my facility and the money I earned yesterday would have just gone into a bottomless pit and I would have been in the same situation as before except that now I wouldn't have a facility and the bank would be twitching every time I wanted to withdraw funds.

Not sure what you mean by this statement. The fact that you have used the overdraft to the full amount, does not mean the bank is going to close the facility down.

Provided there is continuous movement in the account, the bank is happy. I have been in permanent overdraft for some 10 years, only only recently have manged to pull out of it, and at no time was I ever requested to pay all the money in at one time. Of course to get the over draft in the first place, you require collateral, or else they will not give it to you. In my case it was my home, and I was constantly aware of the implications, if something went wrong.

My philosophy has always been that I never get involved in a deal if I can not afford it if it goes South with the current investments I have at my disposal, and in no way influence the security of my family. In other words research any deal very carefully, and always assume the worst case scenario before climbing into it, especially when supplying a third party, I get extremely nervous, if I am not in financial control of the deal.

Had a friend who was taken out by a third party, who got the tender because of BEE, and passed the work onto him, since he had been doing it for years. When the third party got paid, they basically disappeared of the face of the earth, and my friend had to contend with suppliers bills.

As I have said before, an overdraft must be used as a tool and not to satisfy impulse purchases. Plan how it is to be used.

[Dave A]

Standard. I get it annually

Interesting.

I've double checked and I've certainly not been hit with this one before - not for a business account OD facility anyway.
(I don't have a personal OD)

I also see my facilities are up for review this month, so I'll be sure to keep an eye on things and report back...