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Cash Credit Facility

Cash Credit Facility

What is Cash Credit Facility?

Features & Benefits of Cash Credit Loan

1) One can avail a cash credit loan to meet the working capital requirements of a business


2) The borrower will have to provide collateral or security in order to avail a cash credit loan


3) Interest is levied only on the loan amount availed by the borrower and not on the credit amount sanctioned


4) Cash credit loan is a short-term loan whereas decided by the lender, the loan can be repaid on a monthly or on a quarterly basis


5) The applicant has the option of withdrawing the required amount as sanctioned by the bank in order to meet their day-to-day needs


6) A cheque book is issued by the bank in the name of the company, where the latter can withdraw the required amount as per its requirement


7) The borrower will have the option of repaying the loan on either a daily or weekly basis, or as per the repayment structure designed by the lender.


Eligibility for cash credit loans

1) Most lenders require a minimum age of at least 25 years for the business owner. However, this criterion is likely to vary among the lenders in the market. You may have to contact the company to know the age limit required for this loan.


2) A business vintage of at least three years is good for securing this loan. Business vintage refers to the number of years the business has been in operation. This requirement is also likely to vary among lenders in the market. Some lenders provide loans for companies with a business vintage of just one year.


3) Some lenders expect businesses to have filed IT returns for at least one year. This proof must be submitted to the lender while applying for a loan.


4) Proprietorship firms, partnership firms, publicly traded companies, limited liability companies, etc., may apply for working capital loans. Some lenders have certain restrictions on the type of companies that can apply for working capital loans. You can contact the lender to know more details about this.


5) The borrower must provide collateral to be eligible for a cash credit loan. Most companies accept real estate properties as collateral for working capital loans. Other assets like inventory, work-in-progress goods, raw materials, etc., can also be pledged as security to avail this loan.