If you are running a business, wouldn’t it be good to have a financial product from which you can withdraw money for the day-to-day expenses of the business without the inconvenience of paperwork? This is where a cash credit loan could be extremely helpful.
One important thing to understand here is that please do not confuse a cash credit loan with a cash loan. These are two separate financial products. A cash credit loan is only used for business purposes while a cash loan can be used for anything. In this blog, let’s explore everything you should know about cash credit loans.
What is a Cash Credit Loan?
A cash credit loan is a short-term loan product that is only provided to businesses. It aims to help them in their daily operating costs like buying raw materials and paying daily wages. The maximum tenure of this loan is usually 12 months.
Like a credit card, a cash credit loan also works like a line of credit. You will be given a credit limit and you can avail funds up to that amount at any point in time. Your credit line is replenished as and when you repay the loan amount. The interest would only be charged on the money withdrawn.
Cash credit loans come under the category of secured loans. This means that you would need to pledge an asset of your business like inventory, equipment, securities, etc.
Features of Cash Credit Loan
Key Benefits and Characteristics of Cash Credit Loans for Businesses
Cash credit loans are designed to support businesses with their working capital needs, providing flexible revolving credit with convenient repayment options.
Loan Objective
Cash credit loans are only meant to help businesses with working capital requirements. This helps ensure smooth operation of daily business activities.
Line of Credit
A cash credit loan is a revolving credit facility allowing withdrawal from a predetermined credit limit as needed by the business.
Loans Without a Repayment Schedule
Unlike fixed-schedule loans like home or personal loans, cash credit loans have flexible repayment within a maximum tenure, allowing repayment as per convenience.
Secured Loans
Similar to home and car loans, cash credit loans are secured by collateral, requiring businesses to pledge assets to access credit.
Need a Cash Credit Loan for Your Business?
Explore flexible cash credit loan options tailored to your business working capital needs. Apply now to keep your operations smooth and funded.
Apply NowCash Credit Loan Eligibility Criteria
The eligibility criteria help lenders to avoid fraudsters and defaulters. Lenders consider these factors to determine eligibility –
Business Repayment History
Lenders would check the company’s credit score and past loan details to see if the credit behaviour of the company has been responsible or not.
Type of Company
Lenders have different credit policies for different types of entities like sole proprietorships, cooperative societies, limited liability partnerships, etc.
Business Cash Flow and Revenue
To approve cash credit loans, lenders might ask for financial statements like profit and loss statements, tax returns and balance sheets to check how risky it is to extend the loan.
Also Read: Personal Loan Tax Benefits | Tax Deduction & Tax Exemption
Documents Required for Cash Credit Loan
In order to complete your loan application and give you the cash credit loan, banks and NBFCs would need documents to verify identity, assess creditworthiness, evaluate the business’ financial standing and comply with regulatory requirements.
Different lenders would ask for a different set of documents. You can check this on their websites. Here is a list of documents lenders usually ask for –
– Proof of business like the company’s PAN card or GST certificate.
– Financial statements like bank statements and balance sheets.
– Documents of the assets pledged against the cash credit loan.
– Business incorporation certificate.
– Any other document that the lender would need.
Cash Credit Interest Rate on Loan
Interest rate is one of the most important factors you should consider while choosing the lender as it could be a significant cost to your company.
Also, unlike a loan with fixed EMI tenure, the interest on this loan is charged on the outstanding balance of the loan. Most of the lenders in India charge between 8% to 20% per annum.
The interest rate offered to a business depends on many factors such as loan limit, nature of business, lender’s credit policy and business’ repayment history.
How to Apply for a Cash Credit Loan
Step-by-Step Guide for Businesses & Enterprises
Applying for a cash credit loan is simple once you’ve compared offers and chosen the right lender. Follow these steps to avail the loan for your business needs.
Compare Loan Offers
Research and compare terms from different lenders, then finalize the most suitable cash credit loan offer for your business.
Prepare Required Documents
Check the lender’s document list and keep identity proof, address proof, business and financial documents ready for your application.
Complete Application Form
Visit the lender’s office or apply online on their website. Fill out the cash credit loan application form accurately with all details.
Profile Evaluation
Once your application is submitted, the lender will review and evaluate your business profile and documents.
Loan Limit Approval
If your application is approved, the lender will assign a cash credit loan limit to your account.
Withdraw Funds as Needed
Your business can now withdraw money from the approved credit limit as and when required, offering flexible access to funds.
Ready to Avail a Cash Credit Loan?
Support your business growth by applying for a cash credit loan today. Enjoy flexible access to capital for your enterprise needs.
Apply NowUses of Cash Credit Loans
You can use the money borrowed via cash credit loans for these business expenses –
1. New Equipment Purchase or Repair – In case you need money to buy a new machine or repair the existing one, you can get a cash credit loan and ensure that your business runs without any hindrance.
2. Buying Inventory – If you want to buy raw materials or other products in large quantities and need money for the same, you can use this credit facility.
3. Unanticipated Expenses – You can borrow money to take care of any unexpected business expense.
4. Other expenses like daily wages, rent, etc can also be covered using this loan.
Conclusion
You should definitely consider cash credit loans as one of the options for your planned and unplanned working capital expenses. Since it’s a secured loan, the cash credit interest rate levied would be less than unsecured loans. You can go through the loan offers of reputed lenders and choose the one that serves you the best.
If you want an even faster way to avail funds, you can download the Zype app and get a personal loan up to ₹2 lakhs in no time. You can complete the loan application process in less than 6 minutes and get loan approval in 60 seconds. Once you apply for the loan, the money will be credited to your account instantly.
Frequently Asked Question
How To Apply For A Cash Credit Loan?
You can check and compare the eligibility criteria, application process and loan terms of Banks and NBFCs providing cash credit loans and proceed with the one that works the best for you.
Who Is Eligible For The CC Limit?
Cash credit loans are given to businesses, not individuals. Every loan company has their own eligibility criteria. Whether a company is eligible for a cash credit limit or not would depend upon many factors like the nature of the business, its creditworthiness and the lender’s credit policies.
What Documents Are Required For A CC Loan?
Banks and NBFCs can ask for documents like business financial statements, proof of business ownership, collateral documents and identity proofs of company owners.
What Is The Process Of CC Loan?
Once you apply for a cash credit loan by entering the required details and submitting documents, the lender will evaluate your business profile and give you a loan limit. You can then borrow money for working capital expenses as and when you need it.
Who Is Eligible For A Cash Loan?
Different lenders have different eligibility criteria.
What Is The Difference Between A Cash Credit Loan And A Traditional Personal Loan?
A personal loan is a no-questions-asked loan. You can use the money for anything you want. Whereas a cash credit loan is provided solely to businesses to cover their working capital expenses.
You wouldn’t have to worry about hidden charges if you avail cash credit loans from a reputed loan company. The charges you should check before availing the loan are interest cost, processing fee, late payment fee and foreclosure charges.
Can Businesses Also Apply For Cash Credit Loans, Or Are They Exclusively For Individuals?
Cash credit loans are for businesses and not for individuals.
