Overdraft - V2 Configuration

Product Type: Revolving Credit Facility
Use Case: Short-term working capital, cash flow management
Typical Amount: ₦500,000 - ₦50,000,000
Typical Tenor: 12 months (revolving)
Interest Rate: 18% - 32% per annum (on utilized amount)

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Overview

Overdraft is a revolving credit facility linked to a current account, allowing customers to withdraw beyond their account balance up to an approved limit. Interest is charged only on the utilized amount on a daily balance basis.

Key Features

• Revolving Credit: Borrow, repay, and re-borrow up to limit
• Daily Balance Interest: Only pay for what you use
• Current Account Linked: Integrated with operating account
• Commitment Fee: Fee on unutilized portion
• Return-to-Zero: Periodic full repayment requirement
• Collateral Based: Security typically required
• Annual Review: Limit and terms reviewed yearly

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YAML Field Reference

Basic Information Section

Field Name	Data Type	Required	Description	Example
productCode	String	✅ Yes	Unique product code	"OD-SME-001"
productName	String	✅ Yes	Display name	"SME Overdraft Facility"
description	String	No	Product description	"Revolving credit for SMEs"
isActive	Boolean	No	Product status	true
loanProductType	String	No	Loan type	"Overdraft"
lineOfBusiness	Enum	No	Business classification	"Commercial"

Facility Limit Section

Field Name	Data Type	Required	Description	Example
minimumLimit	Decimal	No	Minimum facility limit	500000
maximumLimit	Decimal	No	Maximum facility limit	50000000
defaultLimit	Decimal	No	Default offered limit	5000000
limitCalculationBasis	Enum	No	How limit is determined	"AverageMonthlyTurnover"
turnoverMultiplier	Decimal	No	Multiplier for turnover-based	0.25

Limit Calculation Basis: AverageMonthlyTurnover, NetMonthlyIncome, Collateral Value, FixedAmount

Facility Tenor Section

Field Name	Data Type	Required	Description	Example
minimumTenor	Integer	No	Minimum months	6
maximumTenor	Integer	No	Maximum months	12
defaultTenor	Integer	No	Default tenor	12
autoRenewal	Boolean	No	Auto-renew at maturity	false
reviewFrequency	Enum	No	Review period	"Annual"

Interest Configuration Section

Field Name	Data Type	Required	Description	Example
isEnabled	Boolean	✅ Yes	Whether interest is charged	true
rate.default	Decimal	✅ Yes	Default interest rate (%)	24.0
rate.minimum	Decimal	No	Minimum rate (%)	18.0
rate.maximum	Decimal	No	Maximum rate (%)	32.0
calculationMethod	Enum	✅ Yes	Calculation method	"DailyBalance"
rateTerms	Enum	No	Rate period	"PerYear"
compoundingFrequency	Enum	No	Interest compounding	"Monthly"

Daily Balance Interest Calculation

Field Name	Data Type	Required	Description	Example
dailyBalanceMethod	Enum	✅ Yes	Calculation approach	"AverageDailyBalance" or "DailyProduct"
yearBasis	Enum	No	Days in year	"365" or "360"
interestApplicationFrequency	Enum	No	When to post interest	"Monthly"
minimumChargeAmount	Decimal	No	Min monthly interest	1000

Daily Interest Formula:

Daily Interest = (Utilized Amount × Annual Rate) / Year Basis
Monthly Interest = Sum of all daily interests

Commitment Fee Configuration

Field Name	Data Type	Required	Description	Example
chargeCommitmentFee	Boolean	No	Fee on unutilized portion	true
commitmentFeeRate	Decimal	No	Fee rate (% per quarter)	1.0
commitmentFeeFrequency	Enum	No	Fee collection period	"Quarterly"
feeOnUnutilizedOnly	Boolean	No	Only charge unutilized	true

Commitment Fee Formula:

Quarterly Fee = (Limit - Average Utilized) × Fee Rate

Return-to-Zero Requirements

Field Name	Data Type	Required	Description	Example
requireReturnToZero	Boolean	No	Mandate full repayment	true
returnToZeroFrequency	Enum	No	How often	"Quarterly"
returnToZeroDays	Integer	No	Days to maintain zero balance	7
allowedRTZDeviations	Integer	No	Permitted missed periods	1

Return-to-Zero Purpose: Ensures facility is truly short-term and prevents evergreen debt.

Collateral Configuration Section

Field Name	Data Type	Required	Description	Example
isRequired	Boolean	✅ Yes	Collateral mandatory	true
types[]	Array	✅ Yes	Accepted collateral types	["Property", "Shares", "CashDeposit"]
coverageRatio	Decimal	✅ Yes	Required coverage (%)	150
minimumCoverageRatio	Decimal	No	Minimum acceptable (%)	120
acceptUnsecured	Boolean	No	Allow without collateral	false
unsecuredMaxLimit	Decimal	No	Max unsecured limit	1000000

Eligibility Configuration Section

Field Name	Data Type	Required	Description	Example
minimumAge	Integer	No	Minimum age	25
maximumAge	Integer	No	Maximum age	65
minimumMonthlyTurnover	Decimal	No	Min business turnover	2000000
minimumAccountAge	Integer	No	Account age in months	12
employmentStatus[]	Array	No	Accepted types	["Business", "SelfEmployed"]
requiredDocuments[]	Array	✅ Yes	Mandatory documents	See below
kycLevel	Enum	No	Required KYC tier	"Tier3"

Required Documents:

requiredDocuments:
  - "ValidID"
  - "BankStatement12Months"
  - "BusinessRegistration"
  - "TaxClearance"
  - "BoardResolution"
  - "FinancialStatements"
  - "CollateralDocuments"

Fees Configuration Section

Field Name	Data Type	Required	Description	Example
fees[].code	String	✅ Yes	Fee code	"MAN_FEE"
fees[].name	String	✅ Yes	Fee name	"Management Fee"
fees[].feeType	Enum	✅ Yes	Collection method	"Upfront"
fees[].calculationType	Enum	✅ Yes	Calculation type	"PercentOfLimit"
fees[].value	Decimal	✅ Yes	Fee amount/percentage	1.0
fees[].frequency	Enum	No	Recurring frequency	"Annual"
fees[].glAccountId	Integer	✅ Yes	GL account	40001

Utilization Configuration Section

Field Name	Data Type	Required	Description	Example
allowFullUtilization	Boolean	No	Can utilize 100% of limit	true
utilizationWarningThreshold	Decimal	No	Alert at % utilized	80
restrictMultipleDrawdowns	Boolean	No	Limit number of withdrawals	false
minimumDrawdownAmount	Decimal	No	Min withdrawal amount	10000

Monitoring Configuration Section

Field Name	Data Type	Required	Description	Example
requirePeriodicReview	Boolean	No	Mandatory facility review	true
reviewFrequency	Enum	No	Review period	"Annual"
requireFinancialStatements	Boolean	No	Annual financials required	true
monitoConductAlert	Boolean	No	Alert on irregular conduct	true

Notifications Configuration Section

Field Name	Data Type	Required	Description	Example
sendFacilityApprovalNotification	Boolean	No	Notify approval	true
sendUtilizationAlerts	Boolean	No	Alert on usage	true
sendReturnToZeroReminder	Boolean	No	RTZ reminder	true
sendRenewalReminder	Boolean	No	Renewal notice	true
reminderDaysBefore	Integer	No	Days before event	30
channels.sms	Boolean	No	Enable SMS	true
channels.email	Boolean	No	Enable email	true

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Complete Sample YAML Configuration

basicInfo:
  productCode: "OD-SME-001"
  productName: "SME Overdraft Facility"
  description: "Revolving credit facility for small and medium enterprises"
  isActive: true
  loanProductType: "Overdraft"
  repaymentAllocationOrder: "FEES_PENALTY_INTEREST_PRINCIPAL"
  lineOfBusiness: "Commercial"
  currencyCode: "NGN"

facilityLimitConfig:
  minimumLimit: 500000
  maximumLimit: 50000000
  defaultLimit: 5000000
  limitCalculationBasis: "AverageMonthlyTurnover"
  turnoverMultiplier: 0.25

facilityTenorConfig:
  minimumTenor: 6
  maximumTenor: 12
  defaultTenor: 12
  autoRenewal: false
  reviewFrequency: "Annual"

interestConfig:
  isEnabled: true
  rate:
    default: 24.0
    minimum: 18.0
    maximum: 32.0
  calculationMethod: "DailyBalance"
  rateTerms: "PerYear"
  compoundingFrequency: "Monthly"
  
dailyBalanceConfig:
  dailyBalanceMethod: "AverageDailyBalance"
  yearBasis: "365"
  interestApplicationFrequency: "Monthly"
  minimumChargeAmount: 1000

commitmentFeeConfig:
  chargeCommitmentFee: true
  commitmentFeeRate: 1.0
  commitmentFeeFrequency: "Quarterly"
  feeOnUnutilizedOnly: true

returnToZeroConfig:
  requireReturnToZero: true
  returnToZeroFrequency: "Quarterly"
  returnToZeroDays: 7
  allowedRTZDeviations: 1

collateralConfig:
  isRequired: true
  types:
    - "Property"
    - "Shares"
    - "CashDeposit"
    - "Debenture"
  coverageRatio: 150
  minimumCoverageRatio: 120
  acceptUnsecured: false
  unsecuredMaxLimit: 0

eligibilityConfig:
  minimumAge: 25
  maximumAge: 65
  minimumMonthlyTurnover: 2000000
  minimumAccountAge: 12
  employmentStatus:
    - "Business"
    - "SelfEmployed"
  requiredDocuments:
    - "ValidID"
    - "BankStatement12Months"
    - "BusinessRegistration"
    - "TaxClearance"
    - "BoardResolution"
    - "FinancialStatements2Years"
    - "CollateralDocuments"
  kycLevel: "Tier3"

fees:
  - code: "MAN_FEE"
    name: "Management Fee"
    feeType: "Upfront"
    calculationType: "PercentOfLimit"
    value: 1.0
    frequency: "Annual"
    glAccountId: 40001
  
  - code: "PROC_FEE"
    name: "Processing Fee"
    feeType: "Upfront"
    calculationType: "Flat"
    value: 50000
    glAccountId: 40002

utilizationConfig:
  allowFullUtilization: true
  utilizationWarningThreshold: 80
  restrictMultipleDrawdowns: false
  minimumDrawdownAmount: 10000

monitoringConfig:
  requirePeriodicReview: true
  reviewFrequency: "Annual"
  requireFinancialStatements: true
  monitorAccountConduct: true

notificationsConfig:
  sendFacilityApprovalNotification: true
  sendUtilizationAlerts: true
  sendReturnToZeroReminder: true
  sendRenewalReminder: true
  reminderDaysBefore: 30
  channels:
    sms: true
    email: true
    push: false

penaltyConfig:
  isEnabled: true
  tolerancePeriod: 0
  calculationMethod: "ExcessAmount_DaysLate_Rate"
  rate:
    default: 5.0
    minimum: 3.0
    maximum: 10.0

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Use Cases & Examples

Example 1: SME Working Capital Overdraft

Scenario: Manufacturing business needs flexible working capital.

Business Profile:

• Average Monthly Turnover: ₦20,000,000
• Business Age: 5 years
• Account Age: 3 years
• Collateral: Property valued at ₦30M

Facility Limit Calculation:

limitCalculationBasis: "AverageMonthlyTurnover"
turnoverMultiplier: 0.25

Limit = ₦20M × 0.25 = ₦5,000,000

Collateral Verification:

Required Coverage: 150%
Required Collateral: ₦5M × 150% = ₦7.5M
Provided Collateral: ₦30M ✅

Coverage Ratio: ₦30M / ₦5M = 600% (Well covered)

Monthly Cost Example (Month 1):

Day 1-10:  Utilized ₦0 (No cost)
Day 11-20: Utilized ₦3M
Day 21-31: Utilized ₦5M

Daily Rate = 24% / 365 = 0.0657% per day

Interest Calculation:
Days 1-10:  ₦0 × 0.0657% × 10 days = ₦0
Days 11-20: ₦3M × 0.0657% × 10 days = ₦19,710
Days 21-31: ₦5M × 0.0657% × 11 days = ₦36,135

Total Monthly Interest: ₦55,845

Average Utilization: (₦3M × 10 + ₦5M × 11) / 31 = ₦2.74M
Unutilized: ₦5M - ₦2.74M = ₦2.26M

Quarterly Commitment Fee: ₦2.26M × 1% = ₦22,600

Example 2: Return-to-Zero Requirement

Scenario: Quarterly RTZ requirement with 7-day zero balance.

Configuration:

returnToZeroConfig:
  requireReturnToZero: true
  returnToZeroFrequency: "Quarterly"
  returnToZeroDays: 7

Timeline:

Q1: Jan-Mar
  Jan: Utilized ₦2M-₦5M (fluctuating)
  Feb: Utilized ₦3M-₦4M
  Mar 25: Full repayment → ₦0 balance
  Mar 25-31: Zero balance maintained (7 days) ✅

Q2: Apr-Jun
  Apr 1: Can utilize facility again
  Apr-May: Utilized ₦1M-₦4M
  Jun 25: Full repayment → ₦0 balance
  Jun 25-Jul 1: Zero balance (7 days) ✅

Purpose: Confirms facility is temporary working capital, not permanent debt

Non-Compliance:

Q3: Jul-Sep
  Jul-Sep: Continuous utilization
  Sep 30: Did NOT return to zero ❌

Consequences:
  - Warning letter
  - Penalty interest (additional 2-5%)
  - Risk of facility suspension
  - 2nd deviation: Facility cancellation

Example 3: Commitment Fee Calculation

Scenario: ₦10M facility with varying utilization.

Configuration:

commitmentFeeConfig:
  chargeCommitmentFee: true
  commitmentFeeRate: 1.0  # 1% per quarter
  feeOnUnutilizedOnly: true

Q1 Calculation:

Facility Limit: ₦10,000,000

Monthly Average Utilization:
  January:   ₦2M
  February:  ₦3M
  March:     ₦4M
  Average:   ₦3M

Unutilized Portion: ₦10M - ₦3M = ₦7M

Commitment Fee: ₦7M × 1% = ₦70,000 (charged end of Q1)

Customer pays:
  - Interest on ₦3M utilized (daily basis)
  - Commitment fee on ₦7M unutilized (quarterly)

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Daily Balance Interest Calculation

dailyBalanceConfig:
  dailyBalanceMethod: "AverageDailyBalance"
  yearBasis: "365"

Method 1: Average Daily Balance

Daily Balance × Number of Days × (Annual Rate / Year Basis)

Example (30-day month):
  Days 1-15: ₦2,000,000
  Days 16-30: ₦4,000,000
  
  Interest Days 1-15: ₦2M × 15 × (24% / 365) = ₦19,726
  Interest Days 16-30: ₦4M × 15 × (24% / 365) = ₦39,452
  
  Total Monthly Interest: ₦59,178

Method 2: Daily Product (Exact)

Sum of (Daily Closing Balance × Daily Rate)

Example:
  Day 1: ₦1M × 0.0657% = ₦657
  Day 2: ₦1.5M × 0.0657% = ₦986
  Day 3: ₦2M × 0.0657% = ₦1,315
  ...
  Day 30: ₦3M × 0.0657% = ₦1,972
  
  Sum all 30 days = Monthly Interest

Comparison to Fixed Loan:

Fixed Loan (₦5M, 24% p.a.):
  Monthly Interest: ₦100,000 (always)

Overdraft (₦5M limit, 24% p.a.):
  If utilized ₦5M full month: ₦100,000
  If utilized ₦2.5M average: ₦50,000
  If utilized ₦1M average: ₦20,000
  If not utilized: ₦0 interest (only commitment fee)

Advantage: Pay only for what you use ✅

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Facility Limit Determination

limitCalculationBasis: "AverageMonthlyTurnover"
turnoverMultiplier: 0.25

Common Calculation Methods:

1. Turnover-Based (Most Common for SMEs):

Limit = Average Monthly Turnover × Multiplier

Example:
  Monthly Turnover: ₦20M
  Multiplier: 0.25 (25%)
  Limit: ₦5M
  
Rationale: 25% of turnover provides adequate working capital buffer

2. Income-Based (Salaried Individuals):

Limit = Net Monthly Income × Multiplier

Example:
  Monthly Income: ₦500,000
  Multiplier: 2.0 (200%)
  Limit: ₦1M

3. Collateral-Based:

Limit = (Collateral Value / Required Coverage) × 100

Example:
  Collateral: ₦30M property
  Coverage Required: 150%
  Limit: (₦30M / 150%) × 100 = ₦20M

4. Fixed Amount (Relationship-Based):

Limit determined by:
  - Relationship history
  - Banking conduct
  - Credit bureau reports
  - Management discretion

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Return-to-Zero (RTZ) Enforcement

returnToZeroConfig:
  requireReturnToZero: true
  returnToZeroFrequency: "Quarterly"
  returnToZeroDays: 7

Purpose:

• Prevent facility from becoming term loan
• Confirm business seasonality/cash flow
• Reduce credit risk
• Ensure facility is truly revolving

Monitoring:

Code Removed

Implementation details removed for security.

Contact support for implementation guidance.

Best Practices:

Quarter 1 (Jan-Mar):
  ✅ Plan RTZ for end of March
  ✅ Accumulate cash to clear balance
  ✅ Maintain zero for 7 days
  ✅ Resume utilization in April

Communication:
  30 days before: Reminder notification
  14 days before: Follow-up reminder
  7 days before: Final reminder
  Due date: Compliance check

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Collateral Requirements

collateralConfig:
  coverageRatio: 150
  types:
    - "Property"
    - "Shares"
    - "CashDeposit"

Coverage Levels by Limit Size:

Limit ≤ ₦5M:
  Coverage: 120-150%
  Accepted: Property, Shares, Cash

Limit ₦5M-₦20M:
  Coverage: 150%
  Preferred: Property, Debenture

Limit > ₦20M:
  Coverage: 150-200%
  Required: First-class collateral (property)

Example:

Facility: ₦10,000,000
Coverage Required: 150%
Minimum Collateral: ₦15,000,000

Provided Collateral:
  - Property (₦20M professional valuation) ✅
  - Shares (₦5M market value) ✅
  Total: ₦25M (250% coverage) ✅✅

Why Higher Coverage?
  - Overdraft is revolving (higher risk)
  - No fixed repayment schedule
  - Continuous exposure
  - Market value fluctuation buffer

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Validation Rules

Limit Validation

Code Removed

Implementation details removed for security.

Contact support for implementation guidance.

Collateral Coverage Validation

Code Removed

Implementation details removed for security.

Contact support for implementation guidance.

RTZ Compliance Check

Code Removed

Implementation details removed for security.

Contact support for implementation guidance.

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Troubleshooting

Issue: "Limit exceeds turnover-based calculation"

Cause: Requested limit is higher than allowed multiple of turnover.

Solution:

Average Monthly Turnover: ₦10M
Multiplier: 0.25
Maximum Limit: ₦2.5M

Requested: ₦5M ❌

Options:
1. Reduce limit to ₦2.5M
2. Provide evidence of higher turnover
3. Switch to collateral-based calculation
4. Combination approach (turnover + collateral)

Issue: "Return-to-Zero not met"

Cause: Failed to clear facility for required days.

Solutions:

Required: 7 consecutive days at zero balance
Actual: 4 days

Options:
1. Clear balance immediately and restart 7-day count
2. Request RTZ waiver (rare, management discretion)
3. Accept penalty interest
4. Risk facility suspension if repeated

Prevention:
  - Plan RTZ 30 days in advance
  - Build cash reserves
  - Schedule supplier payments around RTZ
  - Use alternative funding temporarily

Issue: "High commitment fee"

Cause: Low utilization resulting in high fee on unutilized portion.

Solutions:

Facility Limit: ₦10M
Average Utilization: ₦2M (20%)
Unutilized: ₦8M
Quarterly Fee: ₦80,000 (high relative to usage)

Option 1: Reduce Facility Limit
  New Limit: ₦3M
  Average Utilization: ₦2M (67%)
  Unutilized: ₦1M
  Quarterly Fee: ₦10,000 ✅

Option 2: Increase Utilization
  Use facility more actively
  Optimize working capital management

Option 3: Request Fee Waiver/Reduction
  Negotiate with relationship manager
  Based on overall relationship value

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Migration from V1

V1 Overdraft Mapping

V1 Field/Table	V2 YAML Path
OverdraftLimit	facilityLimitConfig.maximumLimit
DailyInterestRate	interestConfig.rate.default (converted)
CommitmentFee	commitmentFeeConfig.commitmentFeeRate
ReturnToZeroPeriod	returnToZeroConfig.returnToZeroFrequency
CollateralCoverage	collateralConfig.coverageRatio
ReviewFrequency	facilityTenorConfig.reviewFrequency

Sample Migration Script

Code Removed

Implementation details removed for security.

Contact support for implementation guidance.

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Last Updated: January 2, 2026
API Version: V2 (BPMCore)
Product Category: Loan Products
Complexity: ⭐⭐⭐⭐ (Complex - Revolving Facility)