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capital finance

Cash Credit

Cash credit is more common for business accounts. This type of cash credit usually requires collateral. Overdrafts allow account holders to maintain a negative balance, without paying a high overdraft fee.

Businesses are more likely to be offered cash credit than individuals. In order to receive cash, financial institutions such as banks or credit unions will usually require that a business customer provide collateral. This security could be a tangible asset such as stock, or property. The percentage of collateralized security is usually used to determine the credit limit on the cash credit account.

Cash credit, as mentioned, is a short-term financing option a customer can use. Cash credit can be used for routine banking transactions if the customer does not have sufficient funds. The daily closing balance is subject to interest, which is not the case with other credit products.

Cash Credit is an facility line sanctioned by a bank for meeting working capital gap in the business. The said loan facility is linked with drawing power calculated by the banks basis inventories, debtors and creditors.