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SADBHAV NAGRIK SAHKARI BANK MARYADIT
Cash Credit Limit
A Cash Credit (CC) is a short-term source of financing for a company. In other words, a cash credit is a short-term loan extended to a company by a bank. It enables a company to withdraw money from a bank account without keeping a credit balance. The account is limited to only borrowing up to the borrowing limit. Also, interest is charged on the amount borrowed and not the borrowing limit.
Important Features of Cash Credit:
- Borrowing Limit:A cash credit comes with a borrowing limit determined by the creditworthiness of the borrower. A company can withdraw funds up to its established borrowing limit.
- Interest on running balance: In contrast with other traditional debt financing methods such as loans, the interest charged is only on the running balance of the cash credit account and not on the total borrowing limit.
- Minimum Commitment Charge: The short-term loan comes with a minimum charge for establishing the loan account regardless of whether the borrower utilizes the available credit. For example, banks typically include a clause that requires the borrower to pay a minimum amount of interest on a predetermined amount or the amount withdrawn, whichever is higher.
- Collateral Security: The credit is often secured using stocks, fixed assets, or property as collateral.
- Credit Period:Cash credit is typically given for a maximum period of 12 months, after which the drawing power is re-evaluated.
Benefits/Advantages of Cash Credit:
- Source of Working Capital Financing:A cash credit is an important source of working capital financing, as the company need not worry about liquidity issues.
- Easy Arrangement: It can be easily arranged by a bank, provided that collateral security is available to be pledged and the realizable value of such is easily determined.
- Flexibility: Withdrawals on a cash credit account can be made many times, up to the borrowing limit, and deposits of excess cash into the account lower the burden of interest that a company faces.
- Tax Deductible: Interest payments made are tax-deductible and, thus, reduce the overall tax burden on the company.
- Interest Charged:A cash credit reduces the financing cost of the borrower, as the interest charged is only on the utilized amount or minimum commitment charge.
Rate of Interest for Cash Credit Limit
The Bank is charging 14% on Cash Credit Limit.
Documents and Details required for Cash Credit Limit are as follows:
- CIBIL Report
- Bank Statement
- Firm/Organization Registration
- GSTIN
- Income Tax Return
- Property for Mortgage
- Diversion
- Namantaran/Mutation
- Bhu Pustika
- Life Insurance
- Collateral Insurance
- Co-Applicant/Gurantor Details
- Applicant KYC
- Co-Applicant/Guarantor KYC
- Mobile Number
- Valuation Report
- Search Report
- Stock Statement
- Financial Statements
Fees structure for Cash Credit Limit
Fees Structure for Cash Credit Limit are as follows:
| S.No. |
Expense Title |
Fees/Expense |
| 1. |
Share Capital |
2.5% of Sanction Amount |
| 2. |
Processing Fees |
2% of Sanction Amount |
| 3. |
GST |
18% GST on Processing Fees |
| 4. |
Building Fund |
INR 250 |
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