State two advantages and two disadvantages of a bank overdraft as a source of finance to a business.

CPA-Financial-Management-Section-3 Revision kit

Advantages of bank overdraft
– Lower interest rate
– No security/collateral required by bank
– Flexibility – available when required.

– Amount of borrowing is restricted.
– Possible change in interest rate without notice.
– Borrower must be an account holder with the bank.
– Legally repayable on demand.

– Guarantees may be need by lender

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