Secured Overdraft Loan (SOD): Definition, Features, Procedures etc.

What is SOD?

SOD(G) Stands for Secured Overdraft Facility (General) and OD stands for Overdraft.

This is the continuous credit facility which is allowed for different business to meet up Working Capital requirements in the business, those who does not maintain Stock i,e. Service Oriented business entity.

Features of SOD Finance

  • SOD is a Continuous finance
  • Continuous drawing and adjustment is possible
  • The validity of the facility would be one year. But it would renew against customers request with the discretion of the bank.
  • Bank applies interest on actual balance
  • Security is needed before disbursing the finance. Security may include Post dated cheques, Corporate Guarantee or any other security.

Documents Required to avail this facility

  • The Financial Statement of the company. Financial statement comprises as Balance Sheet, Income Statement, Cash Flow Statement, Fund Flow Statement etc.
  • Valid Trade license of the business
  • Up to date Tax Certificate
  • KYC (Know Your Customer) Form
  • Other documents needed time to time.

Benefits of SOD

Secured Overdraft offers the following benefits to its client:

  • Cash access while staying invested.
  • Line of credit for cash flow needs at attractive interest rates.
  • Standby line of credit for emergencies
  • Further investment opportunities.
  • No processing involved in opening a secured Overdraft account.

Interest Calculation of SOD A/c

Assume, Ainsdale Inc. has a Secured Overdraft account @ 6.25%. The Credit limit is $100,000/-. The company utilized $ 30,000 on 5th of the calendar month and another $ 20,000 on 10th of the same calendar month. On the 20th of the same calendar month he paid down $ 50,000.

The interest for the month is :

($ 30,000 x 6.25% x 5/365) + (50,000 x 6.25% x 10/365)

= $ 25.68 + $ 85.62

= $ 111.30