What is cash credit? How it is different from Overdraft?

Cash credit is short term working capital loan facility given by banks to Business entities to manage their working capital.

It is a highly regulated credit facility and the borrower has to submit a stock statement at periodical intervals to draw sanctioned limit.

This facility is also subjected to annual renewal and Banks' will get an opportunity to review the overall business of the borrower.

Overdraft facility is also provided for working capital purposes only but it is not as rigid as cash credit.

Cash credit will have primary security (Stock + Receivables) and collateral securities whereas overdraft will only have collateral securities.

There is a lot more to know about cash credit and overdraft.

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