Published: 17th April 2013
I am a director of a relatively small enterprise in Birmingham. Recently there was a discrepancy with my bank account and it appears I had an unforeseen overdraft of about £10,000. After checking our books, we found that a cheque we had written the week before to a supplier never got registered in the books and that put us into overdraft.
The bank paid the overdraft which at the time seemed like a blessing. However, the interest rates on this overdraft are phenomenal because they say it is in a category called ‘unauthorised’ as I never set up an overdraft account with them. I would like to know if there is a way to get a reduction in overdraft fees because this is just one more debt that we can’t afford at this time. What should I do?
Unfortunately, this is a question we are often asked because banks will surprisingly extend a one-time overdraft to solid business customers with a strong history of keeping their account in good standing. As they see it (the bankers) it is a way to ‘force your hand’ into a loan where they will make good money on interest rates.
No, you didn’t ask for a loan, didn’t want a loan and obviously made an error in accounting. Still, no matter how you look at it the end result is the same. You took out a loan (overdraft) for that £10,000. Now then, can you get a reduction in overdraft fees? Perhaps it is possible and there are a few areas you can explore.
First of all, have you tried talking to your bank? Sometimes banks will lower fees and interest rates for their best customers if you ask for a reduction in the fees you are paying. If the bank refuses, have you considered taking out a short term, low interest loan? If your business is not in distress, you may be able to qualify for decent rates.
Another avenue you may want to explore is invoice factoring or invoice discounting. Factors and discounters can lend money based on your book debt ledger by loaning you a percentage of what is owed to you. The one thing you want to be aware of is the rates offered by other lenders so that you can compare rates for the best deal.
On the other hand, if your company is financially distressed and you don’t feel you would be able to get a low rate loan, our insolvency specialists can review your current situation and help you find a way to get out of hot water with the bank. Whether we advise a Company Voluntary Arrangement or help you find financing, the initial consultation is free of charge.
Call the experts at Real Business Rescue to find a solution that works for you. It is often difficult to get banks to reduce overdraft fees but we have alternatives you can explore. Call us on 0800 644 6080 to speak with someone who has the training and experience to offer the advice you need.