Key Takeaways
- Overdrafts are revolving lines of credit that allow businesses to access more working capital than what’s just in their business accounts.
- Overdrafts are great for financial advisory firms because they help them deal with cash flow problems that can affect operations.
- Most lenders want to see at least a year of trading history before they will give you an unsecured overdraft. However, newer businesses can get secured overdrafts.
- Lenders will also check your credit score, with a score of 550 or higher is considered favourable.
- Most lenders who offer unsecured overdrafts don't need full documentation to approve your loan. They only need a read only view of your business bank statements.
- Lenders will need proof of ownership of the asset security for secured overdrafts.
- If you work with a finance broker who knows about advisory business loans, you can find the best overdraft option for you. To learn more, get in touch with Dark Horse Financial.
Overdraft facilities are a useful tool for many Australian financial advisory firms because they allow them to access working capital when they need it most. Overdrafts, like all other types of business financing, don’t get approved automatically. Lenders want applicants to meet certain requirements before they can get financing.
Let’s look at the requirements for financial advisory firms to get overdrafts in Australia, including the documents they usually need. Knowing what you need to do to get an overdraft can help you get one, whether you’re starting a new financial planning business or already have one.
What is an Overdraft?
An overdraft is a revolving credit facility attached to a business bank account. It allows firms to access funds beyond their current balance, up to a predefined limit. This kind of financing is great for filling in cash flow gaps or covering unexpected costs.
Overdrafts give financial advisory firms short term cash flow without having to apply for a new loan every time they need money.
Why Use Financial Advisor Overdrafts?
Here’s why overdrafts are a popular financing choice for this sector:
- Cash Flow Management: Helps smooth over cash flow so businesses can cover day to day expenses.
- Operational Flexibility: Supports payroll, compliance fees, licensing renewals, and other fixed costs.
- No Fixed Repayment Schedule: Unlike term loans, repayments are made only when funds are drawn.
- Interest-Only on Usage: Interest is charged only on the amount used, not the total overdraft limit.
Eligibility Criteria for Financial Advisor Overdrafts in Australia
Below are the Australian overdraft eligibility for financial advisors:
1. Business Financial Position
The financial position of your business is a big part of figuring out if you can pay off an overdraft. Lenders want to be sure that the business makes sufficient revenue to comfortably pay back the money it borrows. Many lenders can see your average financial position over the past 6 to 12 months by looking at a read only view of your business bank account.
2. Trading History
Most unsecured overdraft lenders want the business to have been in business for at least 12 months. This shows that your financial advisory firm has had time to build a client base and make revenue.
But newer advisory firms aren’t always left out. If you are a new financial planner or your business has been open for less than a year, you may still be able to get a secured overdraft as long as you have assets to back it up.
3. Credit Score
The director’s credit score is a major factor in determining if you’re qualified for an overdraft. Lenders typically look for:
- Director’s credit score of 550 or higher
- No recent bankruptcies or major defaults
- A pattern of responsible credit usage
5. Security (For Secured Overdrafts)
A secured overdraft requires the business to offer security in the form of assets. This might include:
- Real estate (residential or commercial)
- Business equipment or machinery
- Vehicles
Security lowers the lender’s risk, which can lead to better interest rates and higher credit limits. If your business is new, has income that changes a lot, or has a low credit score, providing security may be the only way to get an overdraft.
Lenders will want proof that you own the asset and may even do a valuation, especially for high value security like property.
Documents Needed for Overdraft Approval (Advisory Businesses)
Most unsecured overdraft lenders don’t require a lot of documentation from businesses. Many can tell a business’s serviceability through a read only view of business bank account statements.
For secured overdrafts, lenders will ask for documentation and proof of ownership of the asset that will be used as security.
Can New Financial Advisory Firms Obtain Overdraft Facilities?
Yes, new advisory firms can get overdraft facilities, but they usually have to do so through secured overdraft options. Most businesses can’t get unsecured overdrafts with favourable terms until they’ve been in business for at least 12 months.
If you’re starting a new financial planning business and expect your cash flow to be uneven at first, having an overdraft can give you the flexibility you need. To improve your chances of getting approved, make sure you have assets for security.
Do Financial Planners Need Collateral for Overdraft Approval?
No there are a number of unsecured overdraft providers including bank and non-bank loans. Security is only required if you’re applying for a secured overdraft or if your business doesn’t meet the criteria for an unsecured facility (like minimum trading history).
For established financial planning firms with good revenue, steady cash flow, and a solid credit score, unsecured overdrafts are usually available. These are faster to approve and don’t require asset valuations.
Credit Score Needed for Financial Planners’ Overdraft
What credit score do advisory firms need for overdraft approval? Lenders typically require a minimum credit score of 550 for the directors or business owners. The higher your score, the better your chances of approval and the more competitive your interest rate will be.
If your score is below 550:
- Consider secured overdrafts
- Work with a finance broker who specialises in bad credit business loans
- Build up your business’s financial profile before reapplying
Overdraft Application Process for Advisory Firms
Applying for an overdraft is a straightforward process, especially when you’re prepared and working with a lender or broker who understands the financial advisory industry. At Dark Horse Financial, we’ve made the process fast, clear, and tailored to your firm’s needs.
Here’s how the overdraft application process for advisory firms typically works:
Step 1: Apply Online with Dark Horse Financial
Start by completing our online application form. It only takes a few minutes, and once submitted, we’ll get in touch to review your details and begin the initial assessment.
Step 2: Speak with a Finance Specialist
We’ll contact you to discuss your goals, financial position, and borrowing needs. This step helps us determine whether a secured or unsecured overdraft is best for your firm, what your ideal credit limit is, and what lender will be the best fit.
Step 3: Formal Application
Once you’ve chosen an overdraft facility and a lender, we’ll submit your application on your behalf. For unsecured overdrafts, approval can be as fast as 24-48 hours.
Step 4: Approval and Facility Setup
If approved, you’ll receive an offer outlining your overdraft limit, interest rate, and terms. Once accepted, the overdraft facility is set up and linked to your business bank account, ready to use when needed.
Final Thoughts
Getting a business overdraft can give financial advisory firms some much-needed financial breathing room. Knowing the requirements for a financial advisory loan ahead of time can save you time and effort.
How can financial advisory companies get overdrafts? You need to have enough cash flow and a good credit score. To get an unsecured overdraft, your business needs to have been open for at least 12 months. Newer businesses can get secured options. To get a secured overdraft, you have to put up something of value, like a piece of property or equipment, as security.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Get an Overdraft for Your Financial Advisory Business
Talk to one of our finance experts at Dark Horse Financial if you’re not sure or need help with the application process. We specialise in business loans for advisors and can help you find lenders who know your business and your cash flow needs.
