In the construction industry, an overdraft refers to a financial arrangement that allows a company to withdraw more money from their bank account than the available balance. It is a form of short-term borrowing that helps construction companies manage cash flow fluctuations and meet immediate financial obligations, such as paying suppliers, covering labor costs, or purchasing materials.

An overdraft facility is typically granted by the bank based on the company’s creditworthiness and financial stability. Construction companies may use overdrafts strategically during periods of high expenses or delayed payments to bridge the gap between cash inflows and outflows.

It is important for construction companies to manage overdrafts prudently to avoid excessive interest costs and maintain a healthy financial position. Careful financial planning and budgeting can help construction firms minimize the need for overdrafts and ensure financial stability in the long term.

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