Cash Credit Loan

A cash credit loan is a credit facility offered by many lenders through which businesses can borrow as often as needed, up to a specified amount. Much like an overdraft facility, this can also be seen as a working capital loan. 

This is because businesses generally avail this facility to meet the working capital requirements. These include: 

• Purchasing raw materials

• Paying salaries

• Debt consolidation

• Restocking the inventory

Moreover, with digital advancements, online cash credit loans are now easily accessible, allowing you to finance needs without any hassles. 

Read on to learn all about a cash credit loan, eligibility terms applicable, interest rates, and the pros and cons. 

In simple terms, a cash credit loan is a short-term loan that businesses can avail during a cash crunch. Whether your cash is stuck in inventory or there’s a general cash shortage, this facility can help you keep the business operations running. 

Offered against collateral, this credit facility is offered without you having to maintain a credit limit. Generally, it has a repayment tenure of up to 12 months. The facility also allows you to borrow as many times as you need, up to a predetermined limit. 

Moreover, the interest charged is only for the amount you borrow and not for the whole available limit. This means that if your limit is ₹10 Lakhs and you borrow ₹2 Lakhs, the interest is charged only on ₹2 Lakhs and not the entire limit. 

The interest levied and limit offered both depend on your cash credit loan eligibility. You can check these factors before availing the loan to make an informed decision.

Here is a tabular overview of top financial institutions offering cash credit loans:

Disclaimer: The above interest rates and amount for a cash credit loan are subject to change at the lender’s discretion.

The interest rates for offline or online cash credit loans depend on several factors. Two of the main factors are the financial institution offering the facility and your general creditworthiness. Checking the cash credit loan interest rate is crucial because it influences borrowing costs.

Moreover, the interest is only levied on the amount you withdraw from your limit and not on the whole limit. It is also important to keep in mind that the financial institution will review the terms whenever you renew the facility.

Listed below are some of the top features that you can enjoy by availing a cash credit loan:

• Easy credit facility to keep the business operations running during downturns

• Flexibility in access to meet short-term requirements as and when they crop up

• Availability of withdrawing only the amount you need, as often as you need

• Interest is charged only on the amount borrowed and not on the entire limit

• Secured credit facility offered against stocks, receivables, and liquid securities

• Short repayment tenure, generally up to 12 months

• Borrowing limit dependent on your creditworthiness 

While applying for offline or online cash credit loans, ensure that you have the following documents on hand for a smoother application process.

• Banks statements for the last six months as income proof

• PAN card and address proof in the name of the business

• KYC details (PAN, Aadhaar, driver’s licence, etc.)

• Company’s deed for ownership proof

• Details for the security/ collateral pledged with the lender

These documents are to be submitted along with your application form. You should also check the documents required for a cash credit loan on the lender’s official website to ensure that you have everything you need.

Here is a quick overview of the advantages and disadvantages of availing a cash credit loan.

Before applying for a cash credit loan, keep the following points in mind to make an informed decision:

• Check the accepted collaterals forms, some lenders may not accept some assets as collateral

• Check if there are any restrictions on the end-use of the limit made available to you

• Assess how the interest rates are determined and if you can negotiate the same

• Review the loan terms while availing the facility as well as while renewing the facility

• Compare different offers and deals to ensure that the facility is affordable

• Check your eligibility before applying to ensure hassle-free approval

With digital advancements, availing online cash credit loans is simple, easy, and quick. Once you fill out the application form and submit it with the required documents, the lender will assess it. To get the form, you can visit the financial institution’s website or the branch.

If your application gets approved, the lender will notify you of the same. Post that, you can withdraw as many times as you want. Make sure to check the documents required for a cash credit loan before applying to keep them at hand.

Reference of all T&C necessarily refers to the terms of the Partners as regards to pre-approved offers and loan processing time amongst other conditions.