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Understanding Cash Credit Facility

Cash Credit (CC) Facility – Features, Eligibility, and FAQs

Cash Credit Facility

Cash Credit is an instrument of working capital finance. The lender enables customers to use the specified amount. And pay interest only on the used amount. The amount cannot exceed the sanctioned amount. This is known as a “Credit Limit” by the bank. The cash credit facility is generally given for a period of 12 months. It has renewed at the end of the year. CC facility was used to overcome the cash crunch faced due to a credit period of debtors. Drawing Power (DP) is an important concept for Cash Credit (CC) facilities. It is the limit up to which a firm or company can withdraw from the working capital limit sanction.

FAQs on Working Capital Finance.

Features of Cash Credit Facility

  1. Majorly, the borrower’s principal banker gives the CC facility. When the borrower uses the amount, the interest is charged only then. Thus, it reduces the financing cost.
  2. There are no restrictions on the number of withdrawals of the borrower. The only restriction is on the withdrawal amount. The creditworthiness of the borrower determines the borrowing limit. Thus, the borrower can only withdraw up to the limit the banker has set i.e, as DP states.
  3. The credit period is 12 months, generally. After that, the borrower has to renew the period.
  4. CC is available in both secured and unsecured funding. It depends upon the availability of collateral. In the case of secured funds, collateral is assets such as stocks, fixed assets, or property.
  5. The most important benefit of cash credit is its flexibility in deposits and withdrawals. Thus, a borrower can save a lot of interest costs by depositing as and when the cash is available with him.

“ABC Private Ltd” is a company engaged in the manufacturing of goods. Being a manufacturing company, the goods are majorly sold in bulk and on a credit basis. The credit period of the debtor is 30/60/90 days. Also, there was unsold stock. In such a case, the company’s capital is stuck in the form of inventory and accounts receivable. Hence, the company takes a short-term loan in order to meet its working capital issues through a cash credit facility.


  1. Age criteria: Generally, the age of an applicant should be between 21 to 65.
  2. The business should have an existence of at least 3 years or as required by the lender.
  3. CIBIL ratings: If CC is obtained through an unsecured funding option, the borrower will need a creditworthy CIBIL score.
  4. Financial record: Most borrowers have to submit specific financial record which varies according to the lending institution and also upon the borrower’s business.
  5. There is also a specific requirement of monthly income/ turnover criteria for businesses.

Note: Eligibility criteria vary from lender to lender. The above-mentioned is a major used.


1. What is the difference between CC and Loan?

A lender offers a term loan at a specific rate of interest. It has to be repaid within a specified tenure. Whereas, the CC facility is short-term finance. It helps to overcome working capital issues. The banker specifies a certain limit up to which the borrower can withdraw money. He can pay interest only on the used money.

2. Who can avail CC facility?

All the manufacturing and service industries, traders, distributors, companies, partnership firms, and LLPs can apply for a CC facility.

3. What is the amount offered by CC Facility?

The amount of CC depends upon the drawing power of the borrower. DP is calculated by considering the amount of stock, accounts payable, and accounts receivables.

4. Is collateral required?

The collateral depends upon the availability of the borrower. Whether he possesses collateral or not. If the borrower does not have collateral, the ROI in such a situation will be higher than in the secure one.

Why choose Terkar Capital?

If you are looking for a reliable institution for raising finances, Terkar Capital can be the most appropriate for you. We arrange a variety of both debt and equity funding solutions for our clients and try harder to provide these facilities hassle-free. Our confidentiality and transparency in services make us different from others. So, whenever it is corporate funding, Terkar Capital is ready to serve you!

2 Responses
  1. Atul vasant Raut

    I am Atul Raut and I have a POULTRY feed mill and a private poultry farm where we can produce 7500 chickens per month. and also we are supplying feed outside to open poultry farmers. but now it’s time to expand and we are looking for working capital.

    1. Dear Mr. Raut,

      Thank you for sharing the detailed insides. Definitely, we can raise the working capital for you. We will discuss this in detail and take the assignment ahead.

      Best Regards,
      Team – Terkar Capital

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