One in 7 US Middle-Market Companies Use Overdrafts as a Working Capital Solution

Having access to some extra cash from your financial institution at certain points in your personal or professional life may be particularly helpful for individuals and companies, either to cover an extra bill or to continue in business.

In the form of an overdraft, this extra cash has been in the regulatory spotlight for the fees that some banks charge for this service. However, many U.S. firms rely on this type of credit to run their businesses.   

Companies often turn to external working capital solutions when facing new growth plans or operational improvements that allow them to manage the business more efficiently. In the case of the North American region, seven out of 10 companies do so, mainly using bank lines of credit or loans. However, 14% of middle-market firms plan to use overdrafts from corporate bank accounts to improve their cash flow management in the coming year, making it the third most recurrent working capital solution after the two mentioned above.

 About the Numbers

The 2023–2024 Growth Corporates Working Capital Index: North America Edition,” is a PYMNTS Intelligence research study in collaboration with Visa that examines the working capital solutions available to Growth Corporates in the North America region to raise short-term cash or credit and the impact these solutions can have on their operational efficiency and business performance. By growth corporates, the study refers to those companies with annual revenues between $50 million and $1 billion in the agriculture, commercial travel, fleet and mobility, healthcare and marketplaces sectors.

Differences by Sector and Regions 

Talking about the current state of business, the use of bank overdrafts as a working capital solution is skyrocketing in some sectors. For instance, in the case of fleet and mobility, 32% of North American growth corporates say they used this option last year, as per the PYMNTS Intelligence research. The study reported a similar percentage of use among the health and medical sectors, while other industries like commercial travel or marketplaces have reached 9%. Data shows that 15% of agriculture businesses say they use overdrafts. 

North American growth corporates aren’t alone in their use of overdrafts — European businesses also use it as a financial tool. According to another PYMNTS Intelligence study of the working capital series, 16% of European companies use overdrafts from corporate bank accounts as a go-to option. These traditional banking products remain popular among enterprises due to their accessibility and relative affordability.