Cash Credit

A cash credit loan is short-term financing sanctioned by the bank and has usually had a tenure of up to one year. It is categorized under the Working Capital Loan. The bank sanctions a loan up to an agreed limit depending on the applicant's credit history. This allows the applicant to withdraw money which is more than the balance available in their accounts. The amount sanctioned depends upon the need of the funds, the existing current assets and current liabilities of the business, creditworthiness, repayment capacity, etc. Within the sanctioned limit, the business can withdraw any amount as per its requirement. The amount withdrawn under the cash credit loan is charged a rate of interest which is again decided based on the collateral offered, creditworthiness, etc. Cash credit loan is granted against hypothecation of stock and assets such as raw materials, finished goods, including stores and spares.