Cash Credit

Cash credit is a cash loan given to a company. The bank provides the funding only after they acquire the required security to secure the loan. When the security has been provided, the company can continuously draw money from the bank to the specified limit set by the bank.

Features of Cash Credit :

  • BORROWING LIMIT
  • INTEREST ON RUNNING BALANCE
  • IMINIMUM COMMITMENT CHARGE
  • SECURITY
  • Benefits of a Cash Credit...

  • The most important benefit of cash credit is its flexibility of deposit and withdrawals. Due to this, a borrower can save a lot of interest cost by depositing the extra cash available with him. It also keeps the borrower motivated towards collection from debtors which will not only expedite the cash cycle but also bring a disciplinary effect on the debtors and borrower himself.
  • Disadvantages of Cash Credit

  • The primary disadvantage is that securities required should be adequate and the adequacy is evaluated time and again which increases administrative work for the business.

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