A Cash Credit (CC) is a short-term source of financing for a company. In other words, a cash credit is a short-term loan. … It enables a company to withdraw money from a bank account without keeping a credit balance. The account is limited to only borrowing up to the borrowing limit.
Correspondingly, how do I get cc limit?
Generally, CC limit amount is calculated by the bank as a percentage of sale and stock along with financial statements. For example, a bank allowed cash credit limit up to 80% of stock plus 20% of sales or turnover of the business.
Accordingly, how is CC DP calculated?
|A||Total Stock (fully insured)||Rs.1500000|
|G||Less Book debts more than 90 days||Rs.100000|
|H||Book debts up to 90 days old||Rs.400000|
|I||40% margin on “H”||Rs.160000|
|J||DP on book debts (H-I)||Rs.240000|
How is CC interest calculated?
General formula to calculate interest on credit card: (Number of days are counted from the date of transaction made x Entire outstanding amount x Interest rate per month x 12 month)/365.
Features of Cash Credit Loan
It is given against a collateral security.
Since it is a current account, you can make as many transaction as you want. You have to pay interest on the amount which is due by the end of the day.
Advantages of Cash Credit Loans
The bank can easily arrange for a cash credit loan as long as the loan value is determined, and collateral security is pledged. Withdraw as many times from your available cash credit loan up to its withdrawal limit. Deposit whenever you have excess funds to lessen the burden of interest.
Cash credit and overdraft are two types of short-term financing that financial institutions provide to their customers. Both are used to prevent checks from bouncing or debit cards from being declined when there are insufficient funds in checking accounts.
An overdraft is a loan provided by a bank that allows a customer to pay for bills and other expenses when the account reaches zero. For a fee, the bank provides a loan to the client in the event of an unexpected charge or insufficient account balance.
Cash credit is a type of short-term working capital loan extended by financial institutions, which allows the borrowers to utilise money without holding a credit balance in an account. Here, a borrower can withdraw funds up to a limit predetermined by the financial institution as per prior agreements.
Comparison of best cash credit loans in 2020
|Banks/Lender||Interest Rate||Maximum Loan Tenure|
|ICICI Bank||10.4% to 11.5% p.a.||As per the discretion of the bank|
|HDFC Bank||Contact the bank for details||Contact the bank for details|
|IDBI Bank||Contact the bank for details||Contact the bank for details|
|Bajaj Finserv||18% p.a. onwards||96 months|
Both of these financial instruments are used to borrow money against hypothecation of inventory or financial statements.
|Cash Credit should be availed for business purposes, only||An overdraft can be used for any purpose, including business-related requirements|
Cash Credit Loan Eligibility
The applicant must be within 24 to 70 years* of age (*Age should be 70 years at loan maturity.). Additionally, the primary borrower should possess a CIBIL score of 685 or higher. To avail of a cash credit loan, applicants must own a business with a minimum vintage of 3 years.