Business Term Loan vs Dropline Overdraft: Which is Better for You?

Funding Options for Growing Indian Businesses

Managing cash flow cycles, supplier credit, inventory stocking, and business expansion often demands external debt. Two prominent borrowing tools available to business owners are Business Term Loans and Dropline Overdraft (DOD) facilities.

What is a Business Term Loan?

A term loan provides a lump-sum amount upfront that must be paid back in predetermined monthly EMIs over a tenure of 1 to 5 years. Interest is charged on the entire disbursed capital from day one.

What is a Dropline Overdraft (DOD)?

A Dropline Overdraft sanctions a credit limit in your current account. You only pay interest on the exact amount you withdraw and for the number of days you utilize it. The drawing power gradually drops every month, ensuring systematic deleveraging without bulky principal bullet payments.

Which One Should You Choose?

• Choose a Business Term Loan for fixed capital expenses like purchasing machinery, opening a new branch, or IT infrastructure.
• Choose a Dropline Overdraft for fluctuating working capital needs, vendor invoices, seasonal inventory peaks, or receivables gaps.