Key Takeaways
- Overdrafts give you the flexibility you need to deal with short term cash flow problems, like when NDIA payments are late.
- Different lenders have different criteria for who can get an overdraft, and it also depends on whether your overdraft is secured or not.
- For unsecured overdrafts, lenders typically look for time in business, director's credit score, revenue through the business bank account, and the average cash position over a 6 or 12 month period.
- Unsecured overdraft facilities are usually only available to NDIS providers who have been operating for at least 12 months.
- New NDIS providers can access secured overdrafts.
- Working with a professional broker like Dark Horse Financial can help you get the best rates and terms for your overdraft.
Getting the right working capital and credit support is important for many NDIS provider businesses to keep things running smoothly. An overdraft facility is one of these financial products that helps providers manage changes in cash flow while still meeting their obligations.
An NDIS provider may need to use an overdraft facility to keep things running when payments from NDIS participants are late or when there are short term cash flow problems. However, just like with any other financial service, you have to meet certain requirements to be able to get an overdraft. This article goes into the detail about the requirements for NDIS overdraft facilities and what NDIS providers need to gain an approval.
What are Overdraft Facilities for NDIS?
An overdraft facility is a line of credit allowing businesses to withdraw more money than is available in their account, up to an approved limit. The overdraft can be either secured or unsecured.
- Secured Overdrafts: These require the business to provide security, typically a property, to secure the loan.
- Unsecured Overdrafts: These do not require security and can be approved and funded quickly.
For NDIS providers, overdraft facilities can be very useful when there are delays in NDIS payments or during periods of high demand for services.
Who Can Apply for NDIS Provider Overdrafts?
Any NDIS business that has ABN and GST registration can apply for an overdraft facility. Businesses don’t necessarily need to be NDIS registered to qualify. Both established providers and newer businesses are eligible.
Eligibility Criteria for NDIS Overdraft Facilities
What are the eligibility criteria for NDIS overdrafts? Several factors influence whether an NDIS provider can qualify for an overdraft facility. Below, we’ll explore the eligibility rules for NDIS business overdraft loans:
1. Business Financial Position
Lenders will assess the borrower’s business bank account to make sure that there’s consistent revenue over a 6 to 12 month period. Lenders will also want to look at the business’s other expenses and make sure that ATO payments are being made. Lenders will also want to ensure that the business has an average cash balance that suggests direct debit repayments won’t decline.
2. Trading History
For unsecured overdrafts, most lenders require that the business has been trading for at least 12 months. However, newer businesses can always apply for secured overdrafts, as long as they have assets to use as security.
3. Credit Score
The credit score of the NDIS provider and its owners or directors plays an important role in determining eligibility for an overdraft. Lenders will usually look for a credit score of at least 500.
4. Security (For Secured Overdrafts)
For secured overdrafts, the business needs to provide security to back the loan. The business’s director should be able to provide documentation related to the asset proving their ownership, like a rates notice.
What Documents Do I Need for NDIS Overdraft Approval?
Many overdraft providers, especially unsecured providers, don’t require documentation like tax returns and business financials. Usually, your financial position is reviewed via a read-only view of your business’s bank account statements. Documents are usually needed to prove ownership of assets when applying for a secured overdraft.
Key Considerations for NDIS Providers When Applying for an Overdraft
While qualifying for an overdraft facility is essential for managing cash flow, NDIS providers should also consider the following factors before applying:
1. Overdraft Limit
The overdraft limit determines how much the NDIS provider can borrow. The limit is usually based on the business’s cash flow, financial position, and the type of overdraft being applied for. Providers should determine if they need an overdraft limit that’s big enough to support a month or two’s worth of expenses and payroll.
2. Long-Term Financial Strategy
NDIS providers should consider if an unsecured overdraft is big enough to support them. For instance, larger businesses and those going through a high growth phase and growing in headcount would need larger limits. They may be better off considering a combination of a line of credit solution and a selective invoice finance facility.
Frequently Asked Questions
Is my NDIS business eligible for an unsecured overdraft?
Your NDIS business can be eligible for an unsecured overdraft provided that you have sufficient turnover (which can be seen through the business bank accounts) to demonstrate that your business can service the facility.
How do NDIS providers qualify for overdraft facilities?
NDIS providers must have an ABN and must be registered for GST. They should have an acceptable credit score, preferably 500 and above. They should be able to demonstrate cash flow and an overall positive financial position. For unsecured loans, businesses should have a trading history of at least 12 months.
Can new NDIS providers get overdraft facilities?
Yes, new NDIS providers can get overdraft facilities, but typically only secured overdrafts or very expensive lines of credit. Unsecured overdrafts are typically unavailable for very new businesses as they don’t have the historical trade through their bank accounts to demonstrate they can service an overdraft limit. Even if there are options available, favourable rates and terms don’t become available until a business has been trading for at least 12 months.
Final Thoughts
As an NDIS provider, you can get an overdraft if you meet certain requirements, like having consistent revenue over a 6-12 month period and having an acceptable credit score. To be eligible, NDIS providers must meet certain requirements. No matter if you’re a new provider or an established business, knowing these requirements is the most important step to getting an overdraft facility. NDIS providers can effectively manage cash flow, keep providing high-quality services to participants, and grow their businesses in a sustainable way if they make sure they have a solid financial foundation.
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.
Discover NDIS Financing Options
Dark Horse Financial can help you secure NDIS provider finance, from overdrafts to business loans, and tax debt solutions. We’ll help you secure the best rates and terms and connect you with a lender that understands the sector. Talk to us today to learn more.
