Commercial Overdraft Line

The Commercial Overdraft Line from First Horizon National Corporation is a flexible short-term liquidity solution designed for businesses that require immediate, temporary funding to cover timing gaps between receivables and payables. This product provides an overdraft facility tied to a business checking account, enabling authorized withdrawals or payments up to an approved limit without the need to open a separate loan account or submit individual applications for each shortfall.

Key Benefits

• Immediate access to working capital: Bridge temporary cash flow gaps so payroll, vendor payments, and other obligations are met on time.
• Convenience: Funds are available through the business checking account, simplifying account management and cash flow forecasting.
• Cost-effective: Interest or usage fees are typically charged only on outstanding balances, making overdrafts an economical option for short duration needs.
• Flexibility: Limits can be structured to match seasonal needs or anticipated shortfalls, and can be reviewed and adjusted over time as business conditions change.
• Relationship advantages: Customers working with First Horizon National Corporation may benefit from integrated treasury services and advisory support tailored to their industry and growth stage.

Who It’s For

This solution is appropriate for small to medium-sized enterprises, family-owned businesses, and middle-market companies that maintain transactional banking relationships and require predictable short-term liquidity. It is particularly useful for businesses with cyclical revenues, uneven receivable cycles, or those transitioning between financing arrangements.

How It Works

1. Bank and client agree on an overdraft limit based on the company’s financial profile, cash flow patterns, and collateral, if applicable.
2. Authorized signatories may draw against the business checking account up to the approved limit when debit activity exceeds available cleared balances.
3. Interest or fees are charged on the daily overdraft amount, usually calculated and posted at agreed intervals.
4. Clients are encouraged to replenish overdrafts through receivables collections, accounts receivable financing, or other planned inflows.
5. Periodic reviews allow the bank and client to adjust terms to reflect changing needs and credit conditions.

Features and Structure

• Revolving availability: The line is typically revolving for the agreed term, allowing repeated use up to the limit as balances are repaid.
• Customizable limits: Limits are set based on cash flow analyses, historical account activity, and collateral considerations.
• Interest and fees: Pricing is competitive and may be structured as a spread over a base rate or as a flat overdraft fee; fees apply only when the facility is used.
• Collateral options: If required, secured overdrafts can be backed by accounts receivable, inventory, or other eligible assets.
• Integration: Compatible with treasury management services, ACH, and account analysis to provide a cohesive banking experience.

Eligibility and Documentation

Eligibility typically requires an established banking relationship, demonstrated cash flow history, current financial statements, and credit references. Documentation may include business tax returns, balance sheets, income statements, accounts receivable aging reports, and ownership information. The bank conducts a credit assessment and may require personal or corporate guarantees depending on the size and term of the facility.

Use Cases

• Covering payroll when receivables are delayed.
• Meeting vendor payment deadlines to capture supplier discounts.
• Managing seasonal inventory purchases prior to peak sales periods.
• Bridging deposits or down payments required for contracts or projects.
• Handling unexpected expenditures without disrupting operations.

Risk Management and Controls

First Horizon National Corporation manages overdraft risk through pre-set limits, daily monitoring, and covenants tailored to the borrower’s profile. Clients receive detailed account reporting and can set alerts to monitor usage. Periodic reviews and covenant compliance checks help ensure the facility remains aligned with the client’s financial condition and objectives.

Application Process

The application process is streamlined for existing business customers. It begins with a conversation to understand cash flow needs, followed by submission of financial documentation for underwriting. Once approved, terms are documented, authorized signers are established, and the facility is activated for immediate use within the parameters agreed upon.

Considerations Before Applying

• Evaluate the expected frequency and duration of overdraft usage to ensure the overdraft structure is cost-effective versus alternative financing.
• Review covenants and collateral requirements to understand potential operational impacts.
• Maintain clear cash flow forecasting to minimize dependence on overdraft usage and reduce borrowing costs.

Conclusion

The Commercial Overdraft Line with First Horizon National Corporation is a practical, responsive tool for businesses needing short-term liquidity without the complexity of term loans. It offers a balance of convenience, control, and cost-efficiency when used as part of a sound working capital strategy and in conjunction with the bank’s broader commercial services.

Address Bank: Memphis, Tennessee, U.S.
Bank: First Horizon National Corporation
Headquarters: Memphis
Products: Loans & Credit
Type: Commercial Overdraft Line