Cash Credit Loan

Features and benefits of cash credit loans

• Cash credit is provided to a business so that it can take care of its working capital needs.
• This loan is offered as a short-term loan with a fixed repayment schedule. It can be a monthly or quarterly repayment schedule.
• The loan applicant will be required to provide a collateral or a security. The borrower can apply for the loan by getting certain assets such as raw materials, finished goods, or stock hypothecated.
• You will be required to pay interest only on the amount that you utilise and not on the loan that is approved.
• You can withdraw how much ever you want from the cash credit account depending on your requirements.
• One can apply for a cash credit loan against his or her fixed deposit in order to save on interest.
• It loans can be utilised by firms and companies to take care of their daily financial needs.
• The credit limit provided for cash credit loans is usually a proportion of the value of the security provided by the borrower.
• When this facility is offered, the applicant is entitled to draw funds with the help of a running account, by using a cheque book, which has to be provided by the lender in the name of the business entity or the firm.

Security for cash credit loans

A business entity can procure a cash credit loan only when it furnishes a security to secure the loan. This security can be submitted in the form of finished goods, work-in-progress goods, raw materials, stock-in-trade, spare products, and store products.

Differences between cash credit loans and overdrafts

Cash credits and overdrafts are kinds of secured lines of credit. However, there are certain differences between both cash credits and overdrafts. Under cash credit loans, the borrower has to provide a collateral to get the necessary cash. The borrower will be required to pay interest only on the amount that is used by him or her. Cash credit loans are typically offered to business entities.

On the other hand, overdrafts can be of 2 types and they include regular overdrafts and secured overdrafts. When you choose a regular overdraft, you will be allowed to take out more funds from your account than your actual balance would allow you to. When you select a secured overdraft account, you can use a collateral such as life insurance policies, bonds, mutual funds, debentures, etc. to secure your credit.

• This loan can be procured by a loan applicant when he or she has a cash credit account with the lender. On the other hand, one can obtain an overdraft facility only if the applicant has a current account.
• To get a cash credit facility loan, the loan applicant will be required to submit a collateral security or hypothecate a stock or security. On the other hand, for an overdraft facility, one will be allowed to furnish only a fixed asset as a collateral.

The following banks offer Cash Credit Loans

ICICI Bank Cash Credit Loan

Working Capital Finance is offered by ICICI Bank. It is an innovative way to finance the working capital requirement for your business. The bank offers the following facilities:

Cash credit limit or overdraft facility to meet your daily requirements.

Working capital limits to meet your export requirements.

Working capital limits in the form of Letters of Credit and Buyers Credit to ensure the goods are delivered on time.

Bank Guarantees to meet performance and financial obligations.

HDFC Bank Cash Credit Loan

HDFC Bank offers Commodity Pledge Loan and Cash Credit or Overdraft facility to meet the working capital requirement of your business. The overdraft facility is provided after assessing working capital requirements. The borrower will have to provide 3 years financial statement to the bank.

IDBI Bank Cash Credit Loan

IDBI offers working capital finance- IDBI Bank Working Capital. The working capital funds are finances to purchase raw materials, stores, fuel, paying the labor, power charges, storing goods, etc. The credit is granted against hypothecation of stock. You will have to open a running account and drawings are regulated within the permissible drawing limits.

Axis Bank Cash Credit Loan

Cash credit is offered to meet the day to day working capital requirement needs. The credit is provided against the primary security of stock, debtors, current assets and collateral security of movable and immovable assets. The interest is sanction on the amount utilised.

Oriental Bank of Commerce (OBC) Cash Credit Loan

Loan for traders is offered to buy Oriental Bank of Commerce to meet the day-to-day working capital requirements. Term loan is offered to acquire premises or land or to construct a building to run the business. The loan is also provided to repair, furnish or renovate and to purchase brand new equipment, software, business tools, computer or UPS.