Cash Credit Loans emerge as a vital financial instrument, providing businesses with a short-term financial boost to fulfill various operational needs. From catering to working capital requirements and facilitating business expansion to acquiring machinery, purchasing raw materials, managing stock, hiring personnel, salary disbursement, undertaking training initiatives, and debt reduction – the scope of cash credit loans is broad. Typically characterized by a short-term nature, these loans come with a maximum repayment term of 12 months, extendable based on mutual agreement.
Key Features Illuminated
1. Working Capital Alleviation
At its core, a cash credit loan is designed to alleviate a company’s working capital needs.
2. Collateral as a Gateway
A prerequisite for obtaining this financial lifeline is the provision of collateral or security.
3. Interest Dynamics
The uniqueness lies in the fact that interest is levied solely on the withdrawn loan amount, not the overall approved credit amount.
4. Flexible Repayment Landscape
The flexibility extends to repayment schedules, which can be structured on a daily, weekly, monthly, or quarterly basis, aligning with the mutually agreed-upon terms.
5. Dynamic Fund Withdrawal
Applicants enjoy the liberty to withdraw the sanctioned amount as per their day-to-day operational demands.
6. Checkbook Empowerment
For added convenience, banks issue a dedicated checkbook in the company’s name, facilitating easy fund withdrawal.
Cash Credit Loan Eligibility Spectrum
1. Age Mandate
Business owners are typically expected to be at least 25 years old.
2. Financial Chronicle
A minimum requirement of IT reports for at least one year may be imposed by some lenders.
3. Business Entity Inclusivity
Embracing a variety of business entities, including sole proprietorships, partnerships, publicly traded enterprises, and limited liability companies.
4. Vintage Significance
A business vintage of a minimum of three years is often preferred, although exceptions may apply.
5. Collateral Prerequisite
Collateral, often in the form of real estate, serves as a prerequisite for securing the loan.
Cash Credit Loan Interest Rate – 2024
| Bank or NBFCs | Interest Rate |
| Bajaj Finserv | 9.75% – 30% p.a. |
| UGRO Capital | 14.90% p.a. |
| Kotak Mahindra Bank | 16% – 26% p.a. |
| Tata Capital | 12% p.a. onwards |
| NeoGrowth Finance | 19% – 24% p.a. |
| HDFC Bank | 10% – 22.50% p.a. |
| Mcapital | 2% per month onwards |
| Indifi | 1.50% per month onwards |
| IDFC First Bank | 10.50% p.a. onwards |
| HDB Financial Services Ltd. | Up to 36% p.a. |
| Lendingkart | 12% – 27% p.a. |
| Axis Bank | 14.95% – 19.20% p.a. |
Documentary Conditions
To embark on the journey of obtaining a cash credit loan, applicants need to furnish a well-curated set of documents, including CA-certified financial statements, six months of bank statements, IT returns for at least a year, records of loan repayment (if applicable), and evidence of collateral.
Advantages
1. Holistic Working Capital Coverage
A robust solution to meet diverse working capital needs effectively.
2. Expeditious Processing
The secured nature of these loans facilitates quick processing and sanctioning.
3. Flexibility Redefined
Cash credit loans come in the dual avatars of overdraft facilities or term loans, offering flexibility in repayment structures.
4. Negotiable Rates
With a strong credit history, businesses can negotiate favorable loan rates.
5. Tailored Payment Period
Monthly or quarterly payment flexibility ensures alignment with the business’s cash flow.
In conclusion, Cash Credit Loans emerge as a dynamic financial instrument, adapting to the nuanced needs of businesses across industries, and proving instrumental in navigating the complex landscape of operational finance.
Disclaimer
The interest rates provided are indicative and subject to change based on the respective financial institutions’ policies and market conditions. Applicants are encouraged to directly verify the current interest rates and terms with the concerned financial institutions before making any financial decisions. The provided information is for informational purposes only and should not be considered financial advice.