Table of Contents
Introduction
Managing working capital is essential for business success. Many businesses need continuous access to funds instead of receiving a one-time loan amount.
A cash credit facility provides flexible access to funds based on approved limits.
What is Cash Credit?
Cash credit is a short-term financing facility where businesses can withdraw funds up to a sanctioned limit.
The limit is generally based on:
- Business turnover
- Stock value
- Receivables
- Financial strength
Features of Cash Credit
Flexible Withdrawal
Businesses can use funds whenever required.
Interest on Used Amount
Interest is generally calculated on the utilized amount according to applicable terms.
Revolving Facility
Funds can be withdrawn and repaid repeatedly within limits.
Benefits of Cash Credit
Better Cash Flow Management
Helps handle operational expenses.
Supports Inventory Purchase
Useful for maintaining stock levels.
Flexible Financing
Businesses access funds according to needs.
Eligibility Criteria
Factors include:
- Business performance
- Financial statements
- Credit history
- Banking records
Documents Required
Common documents:
- Business registration proof
- Financial statements
- GST records
- Bank statements
- Identity documents
Cash Credit vs Term Loan
| Cash Credit | Term Loan |
| Flexible withdrawals | Fixed loan amount |
| Mainly short-term use | Long-term financing |
| Helps working capital | Helps asset creation |
FAQs
Is cash credit only for large businesses?
No, eligible businesses of different sizes may apply.
Is cash credit different from a normal loan?
Yes, it provides revolving access to funds instead of a one-time disbursement.
Conclusion
Cash credit facilities help businesses manage daily financial requirements efficiently. Choosing the right financing option depends on business needs and repayment ability.
