Cash Credit : Overviews

Cash Credit : Overviews

Cash Credit is also known as Working Capital .Cash Credit is a facility to withdraw the amount from the business account even though the account may not have enough credit balance. The limit of the amount that can be withdrawn is sanctioned by the bank based on the business cycle of the client and the working capital gap and the drawing power of the client. This drawing power is determined, based on the stock and book debts statements submitted by the borrower at monthly intervals against the security by hypothecating of stock of commodities and/ or book debts.

The excess withdrawal of cash is made generally on demand from the customer and the customer has to pay interest on the excess amount he/she has withdrawn. The Cash Credit facility is quite useful to those businesses where cash payment like wages, transportation,cash purchases are to be made and the receivables are not realized in time.