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Banks provide short-term ﬁnance to companies in the form of an overdraft on a current account. The advantage of an overdraft is its ﬂexibility. When the cash needs of the company increase with seasonal factors, the company can continue to write cheques and watch the overdraft increase. When the goods and services are sold and cash begins to ﬂow in, the company should be able to watch the overdraft decrease again. The most obvious example of a business which operates in this pattern is farming. The farmer uses the overdraft to ﬁnance the acquisition of seed for arable farming, or feed through the winter for stock farming and to cover the period when the crops or animals are growing and maturing. The overdraft is reduced when the crops or the animals are sold. The main disadvantage of an overdraft is that it is repayable on demand. The farmer whose crop fails because of bad weather knows the problem of being unable to repay the overdraft. Having overdraft ﬁnancing increases the worries of those who manage the company. The other disadvantage is that the interest payable on overdrafts is variable. When interest rates increase, the cost of the overdraft increases. Furthermore, for small companies there are often complaints that the rate of interest charged is high compared with that available to larger companies. The banks answer that the rates charged reﬂect relative risk and it is their experience that small companies are more risky.