Cash Credit Loan: Eligibility, Interest Rate & How to Apply?

Capital is the fuel to run a business operation. Lack of it limits your enterprise’s growth and prosperity. Therefore, you must always be on the lookout to meet your capital needs. External financial assistance is often necessary to ensure sufficient funds in the business to carry out the business seamlessly. A cash credit loan is one of the most popular financial aid forms for small business owners. It provides revolving access to credit that finance companies offer based on your business performance and creditworthiness.

This post offers a comprehensive overview of these loans, covering their essential aspects like Cash Credit (cc) loan interest rate, features, benefits, eligibility, documentation, etc.

What is a Cash Credit Loan?

Cash credit is a short-term loan or funding for a business to meet working capital requirements. Finance providers extend these loans to companies based on their financial stability and credit history. If you obtain a cash credit loan, you can use the amount for any business-related purpose, like business expansion, marketing, staff hiring or training, plant or equipment purchase, etc.

By availing of this facility, you can withdraw cash up to a certain limit as pre-determined by the service provider. Moreover, the cash credit interest rate is reasonable, and you must pay it only if you withdraw money from the available credit limit.
Read Also: Understand the difference between Cash Credit and Overdraft

Features and Benefits of Cash Credit Loan

Cash credit is among the most sought-after options with a reasonable cc loan interest rate. Here’s a look at its features and benefits before applying for one:

Purpose of Loan

Like a Personal Loan, cash credit providers also do not impose any end-use restrictions on the available credit limit usage. That means you can use it for any business-related purpose, including working capital needs, expansion, marketing, staffing, etc.

Rate of Interest

Since cash credit is a revolving loan, you pay an interest rate only on the amount you withdraw from your available credit limit. However, the applicable interest rate may be higher than a Personal Loan.

Borrowing Limit

The borrowing limit largely depends on your business performance, credit history, and existing relationship with the credit provider. If you apply for a secured cash credit loan, the loan amount will depend on the collateral’s value.

Repayment Tenure

Since cash credit is a revolving line of credit, it remains valid for a year, during which you can withdraw an amount from your available credit limit. Once this validity period ends, you must renew the tenure to continue availing of the service.

Collateral

Cash credit can be secured or unsecured, depending on the company’s policy and your loan requirement. You must provide an asset like your inventory as security against a secured loan, while an unsecured loan is collateral-free.
Read Also: Urgent need of cash? Here is how you can get an instant cash loan online?

Difference Between Cash Credit and Overdraft

Learn about the differences between cash credit and overdraft facilities, essential for understanding their financial applications and benefits.

Eligibility Criteria for Cash Credit Loan

Have you made up your mind to apply for a cash credit loan? You must ensure fulfilling the following eligibility criteria before taking further steps:

• Age: The minimum age requirement is 25 years old. However, it differs from one lender to another.
• Entity Type: Any individual, partnership firm, limited liability partnership, registered trust, private limited company, public limited company, or cooperative society can apply for a cash credit loan.
• Business Experience: Your business should be operational for somewhere around 2-3 years to qualify for cash credit.
• Credit History: Your personal and business credit rating significantly determines your cash credit eligibility.
• Financial Records: You must provide your tax returns, profit and loss statements, balance sheets, and other financial records to prove your eligibility for cash credit.
• Cash Flow: Your business revenue and cash flow must be satisfactory to obtain cash credit.
• Collateral: It can be secured or unsecured; you must provide the required collateral for a secured loan at a lower interest rate, like your inventory or equipment.

List of Required Documents for Cash Credit Loan

Given below is a list of documents you must submit to apply for a cc loan:

• Duly filled cash credit application form
• Identity Proof: Aadhaar card or any other government-issued photo ID
• Address Proof: Utility bill, bank statement, etc.
• Business Proof: PAN card, license, or GST certificate
• Latest bank statements of the primary business account
• Financial statements like profit and loss account, ITR, and balance sheet
• Collateral documents like property deeds and proof of ownership for a secured cash credit loan

Cash Credit Loan Interest Rate

Usually, the interest rate is variable depending on a benchmark rate like the MCLR (Marginal Cost of funds-based Lending Rate) or base rate. Finance companies may add a margin over this rate to offer you the final cc limit interest rate. You must pay the interest monthly or quarterly based on the utilised amount from the available credit limit. That means the interest rate is chargeable only on the amount you withdraw from the total sanctioned cc limit. The interest rate largely depends on your credit history, loan size, risk profile, market conditions, etc.

How to Apply for a Cash Credit Loan?

The application process for a cash credit loan is similar to a Personal Loan apply online procedure. These are the general steps involved:

• Research: Research cash credit plans from various finance companies to compare their offers based on interest rates, collateral requirements, repayment terms, etc., and choose the most suitable scheme.
• Gather Documentation: Check their documentation requirements and collect all the necessary records before applying.
• Contact the Finance Provider: Visit the selected company’s website to initiate the application process by filling out an online application form.
• Submit the Loan Application: Submit the application and the necessary documents and wait for verification.
• Accept and Utilise: After verifying your details, the company will approve your cash credit with a specified limit and cc limit interest rate. You must accept the offer to start utilising the available credit limit.

Conclusion

A cash credit loan is highly flexible to help you cover various financial needs. However, always choose a customer-centric finance company like Hero FinCorp to fulfil your loan requirements and manage unforeseen expenses. Whether you need funds for growth aspirations or unexpected costs, cash credit from Hero FinCorp can provide much-needed financial support and help you fulfil your goals.
Read Also: Instant Cash Loan Vs Credit Card: Which is the better option

Frequently Asked Questions

1. How is the eligibility for a cash credit loan assessed?

Your eligibility for cash credit depends on your business performance and credit history.

2. What is an example of a cash credit loan?

If you need a loan for your business, you may apply for cash credit up to the maximum amount of borrowing specified by the lender. If you withdraw an amount, you must pay interest instead of the available credit limit.

3. What is the difference between CC and OD?

The major difference between cash and overdraft is that cash credit is meant for businesses only, while overdraft is also available for individual borrowers looking for funds for personal needs.

4. What documents are required for the CC limit?

Documentation requirements for cc limit include your identity and address proof, business proof, financial statements, etc.

5. What are the two types of cash credit?

Cash credit can be of two types: secured and unsecured.