Dropline Overdraft: The Smart Financing Choice

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Dropline Overdraft - Flexible Financial Solution
for Businesses
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Definition

• A Dropline Overdraft is a hybrid credit facility
  combining the features of a term loan and an
  overdraft. It is granted against collateral,
  often property or fixed deposits, with a limit
  that drops over the pre-set tenure of the
  facility.

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How it Works

• Visual Diagram A descending line graph
  showcasing the gradual decrease in the overdraft
  limit over time.
• Example "Starting limit of 100,000 reducing by
  10,000 each month.

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Key Features

• Flexibility Withdraw funds as needed up to the
  available limit.
• Reducing Limit Encourages better financial
  planning and discipline.
• Cost-Effective Lower interest rates compared to
  unsecured borrowing options.

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Benefits

• Cash Flow Management Ideal for managing working
  capital and cash flow fluctuations.
• Interest Savings Interest charged only on
  utilized funds, not on the entire limit.
• Emergency Buffer Acts as a financial buffer for
  unforeseen business expenses.

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Ideal for

• Seasonal Businesses Those that experience
  considerable variability in cash flow.
• Project-Based Operations Companies that have
  project-specific funding needs.

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Comparison with Regular Overdraft

• Interest Rates Often lower in Dropline Overdraft
  facilities.
• Limit Tenure Fixed, reducing limit as opposed to
  a constant limit in traditional overdrafts.
• Repayment Structure Flexible repayments with the
  objective of decreasing credit exposure over
  time.

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Possible Drawbacks

• Interest Accumulation If not strategically
  managed, the facility can accumulate significant
  interest.
• Debt Trap Risk Mismanagement can lead to a cycle
  of debt, particularly if the business income does
  not meet projections.

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Case Study/Example

• XYZ Traders accessed a dropline overdraft of
  50,000 to manage off-season inventory buildup,
  repaying incrementally during peak season, thus
  optimizing their interest payments.

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How Oxyzo Helping SMEs With Dropline OD

• Looking for a financial partner that understands
  the unique needs of your business? Contact Oxyzo
  today to explore Dropline Overdraft solutions
  tailored for SMEs. Empower your business with the
  right financial tools to grow and thrive. Reach
  out to Oxyzos team of experts to set up a
  consultation and take the first step towards
  flexible, smart financing.

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Conclusion

• The Dropline Overdraft is a strategic tool for
  businesses that require flexible and
  cost-effective financial solutions to manage
  their working capital needs effectively.