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Commercial Loan granted by way of Overdraft against Current Account is permission to withdraw more than deposited amount in the account. Generally, bank does not seek any information regarding utilization of overdraft amount. It is a special credit provided to businessmen as per his credit and its business performance history. The process for availing overdraft is simple as the borrower has to intimate bank regarding overdraft requirement and timeframe for repayment.

The Bank after necessary formalities informs the client regarding amount and limit of overdraft. The Rate of interest varies from 11% to 28 % depending on relationship of client with bank and past credit history. There is a lot of scope for bargaining with Bank regarding interest rate if client has sound profitability performance. One of the good features of overdraft is that interest is to payable only to such amount which is withdrawn against overdraft facility and not on the whole overdraft amount. The amount of overdraft can be utilized as per requirement and hence burden of extra interest payment can be avoided.

The second way of availing commercial loan is Loan granted for specific business purpose. As an entrepreneur, you have to submit necessary documents to bank for loan purpose. The documents include Profit and Loss Account, Balance Sheet of last 2-3 years, detailed project report regarding utilization of commercial loan amount duty approved by Management Accountant or Chartered Accountant or technical expert person as the case may be. Bank verifies the documents and reports in detail before sanctioning the loan. In some cases, bank also verifies the assets of borrower and demand for pledge as a security. The amount of loan is sanctioned with view to business size and growth prospectus, number of years of business operational and repaying capacity with regard to Profit of the business.