Interest rates for drawdown are usually fixed. It also means that, while the headline interest rate on your drawdown arrangement is almost certain to be higher than for a traditional term business loan, you might still end up repaying less interest overall. No one likes being in more debt than strictly necessary, so you can simply borrow the amount you need at any one time, and no more.Īs you only borrow what you need, this means that you won’t be making unnecessary interest repayments. These arrangements are totally flexible, so if you only need to access your drawdown facility once or twice, then that’s no problem.Ī business’s needs change over time. However, if you decide you don’t need to borrow any additional amounts, then that’s fine. For example, if your drawdown facility has a limit of £5,000, you might borrow £1,000 initially, but you can still return and borrow a further £2,000 three months later, or £3,000 six months later – indeed you can access any amount up to your drawdown limit, all without needing to arrange a new credit facility. In a nutshell, you borrow what you need, when you need it. The flexibility of drawdown arrangements is perhaps their most attractive feature. Then, when you’ve repaid the original borrowing, you might start thinking about whether you need to access any more funds. The daily interest rate might be somewhere between 0.05% and 0.1%. After making a withdrawal, you might then repay the amount borrowed, plus interest, over several months. This means that it’s effectively a form of ‘revolving credit’ arrangement.Ī drawdown agreement might typically have a term of 12 or 24 months. However, instead of receiving the loan amount as a single lump sum at the start of the agreement, it allows you to borrow differing amounts at different times throughout the term of the agreement. All you have to do now is to make sure you have enough in your account each month to make your repayments on time.Simply speaking, a drawdown facility is a type of business loan. To make this easy, the bank will suggest that you repay by setting up an automatic payment scheme. Your repayments will most likely be debited directly from the bank account you have selected. Once you are satisfied with all the details of the loan, you will have to sign the approval letter and perhaps some other documentation.Īfter a short period for processing, the money is usually paid directly into the bank account of your choice. Or you can check the offer with a solicitor or an accountant. If you are still unsure, your contact at the bank will be happy to answer your questions. Read the loan approval letter carefully, as it will set out everything you need to do. We'll tell you whether the loan is approved, usually by letter. The bank may need to evaluate your financial position and assess your repayment ability. Provide financial information if needed.He or she will help you assess your individual needs, repayment options and insurance requirements. Unless you know exactly what you want and how much it is going to cost you, it is advisable to talk to your bank manager. See what loans are available from HSBC and how well they will meet your needs. A step-by-step guide to how the loan process works.
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