From covering cashflow gaps to accounting for unexpected expenses, overdraft protection can become an essential part of safeguarding your business’s finances.
Suppose you wrote a check to a material supplier last week, and unfortunately, the accountant was out sick that day. Meanwhile, you forgot about the check, using your business checking account to make your everyday transactions. The check clears weeks later, and now you are hit with a hefty fee.
With overdraft protection, you could have avoided this hassle, and such a simple mistake wouldn’t have to derail your business operations.
Overdraft protection is a form of credit that the bank extends to business owners to protect them from hefty fees and assist with their operations’ seamless running. When a business writes a check for more than the amount available in the account, this triggers overdraft fees which can snowball, costing the business many times over.
With overdraft protection, the bank will automatically “loan” the business money to cover the check’s amount when the account does not have sufficient funds to cover it. Typically, the bank will then charge the business a fee of $35 for this service.