Secured Current Account: what it is and its main advantages
Posted: Thu Dec 05, 2024 8:29 am
Find out what a secured current account is, how important it can be for companies, the main advantages of this type of financing and also some disadvantages of using it.
What is a Escrowed Checking Account?
It is a form of short-term financing that allows you to manage any cash shortages. An escrow account is the allocation of a cash credit, agreed between the company and a banking institution. This way, the fusion phone number data has the possibility of accessing a certain amount of money quickly, even if it does not have a balance available in the bank account.
How a Secured Checking Account Works
As with any type of financing, there are some guidelines that must be followed when entering into an agreement between the company and the bank responsible for the escrow account. The financial institution is responsible for outlining the terms of the amount to be credited and the respective interest rates, taking into account the analysis carried out and meeting the company's needs. Typically, the term varies between 180 days and one year (with the possibility of renewal) and interest payments are made monthly or quarterly. It is also common for the bank to require a guarantee from the company.
Advantages of a Secured Current Account
Clearly, an escrow account is advantageous for companies, as it allows quick and flexible access to credit, ensuring the company's liquidity. These are the main advantages:
ease of use of credit , without much bureaucracy and in a way that suits the company's needs;
the interest associated with the current account is proportional to the amounts used , that is, the interest payment is calculated only on the balances actually used;
flexibility in terms, credit amounts and interest rates , adapting to the company's specific needs;
possibility of carrying out operations in foreign currency , as long as it is listed by the Bank of Portugal.
Disadvantages of a Secured Checking Account
Although usually advantageous, an escrow account can represent a financial burden for the company, especially if it is used systematically and for long periods of time. Therefore, there are some costs associated with an escrow current account:
Dossier or Formalization Commission, charged even if the escrow account is not approved;
Opening Commission, due at the time of opening a secured account and associated with the credit limit;
Immobilization Commission, charged on the value of the secured current account limit that is not in use;
other costs such as account management fees or fees for using the escrow account.
It is therefore necessary to carefully consider whether this form of financing is the most appropriate credit model for the company's needs at the time, thus avoiding financial and/or liquidity problems.
What is a Escrowed Checking Account?
It is a form of short-term financing that allows you to manage any cash shortages. An escrow account is the allocation of a cash credit, agreed between the company and a banking institution. This way, the fusion phone number data has the possibility of accessing a certain amount of money quickly, even if it does not have a balance available in the bank account.
How a Secured Checking Account Works
As with any type of financing, there are some guidelines that must be followed when entering into an agreement between the company and the bank responsible for the escrow account. The financial institution is responsible for outlining the terms of the amount to be credited and the respective interest rates, taking into account the analysis carried out and meeting the company's needs. Typically, the term varies between 180 days and one year (with the possibility of renewal) and interest payments are made monthly or quarterly. It is also common for the bank to require a guarantee from the company.
Advantages of a Secured Current Account
Clearly, an escrow account is advantageous for companies, as it allows quick and flexible access to credit, ensuring the company's liquidity. These are the main advantages:
ease of use of credit , without much bureaucracy and in a way that suits the company's needs;
the interest associated with the current account is proportional to the amounts used , that is, the interest payment is calculated only on the balances actually used;
flexibility in terms, credit amounts and interest rates , adapting to the company's specific needs;
possibility of carrying out operations in foreign currency , as long as it is listed by the Bank of Portugal.
Disadvantages of a Secured Checking Account
Although usually advantageous, an escrow account can represent a financial burden for the company, especially if it is used systematically and for long periods of time. Therefore, there are some costs associated with an escrow current account:
Dossier or Formalization Commission, charged even if the escrow account is not approved;
Opening Commission, due at the time of opening a secured account and associated with the credit limit;
Immobilization Commission, charged on the value of the secured current account limit that is not in use;
other costs such as account management fees or fees for using the escrow account.
It is therefore necessary to carefully consider whether this form of financing is the most appropriate credit model for the company's needs at the time, thus avoiding financial and/or liquidity problems.