Cash Credit(CC)

Businesses need regular cash inflows to take care of their day-to-day operations. If the working capital requirements are not properly met for a business, it could severely affect its smooth business operations. Cash credit loans are developed to take care of these business requirements. The business may use these funds for any kind of operational expenses including raw material procurement, machinery purchase, overhead costs, debt settlement, inventory costs, etc. A cash credit limit or CC limit is a kind of current account with chequebook facility. Cash credit limit or CC limit sanctioned by the bank to the small and medium enterprises (SME) to fulfil their working capital requirements. CC limit holders offer stock and debtors as a primary security to the bank. A CC limit allows you to withdraw money or issue a cheque up to the approved CC limit, even if there is no balance in the account. It is a short-term credit facility generally for 12 months, which is renewable after every 12 months. The borrower has to pay interest on the utilized amount only, not on the limit sanction. Interest is calculated on the daily overdrawn balance and debited to the cash credit or CC account monthly. Whatever amount you repay into the cash credit or CC account; you can withdraw it again as long as the limit is not over-utilized. That’s why a Cash credit limit or CC limit facility is also called a revolving credit facility.