Are you a business owner and your company needs funds? Have you come across the term cash credit loan? If the answer to any of the two questions is yes, then you have landed at the right place. Borrowing loans is a very convenient and suitable option whether you or your enterprise needs money. These days, most big banks offer loans, and even a lot of digital portals have come up that offer loans to individuals and organizations. You can easily browse through a wide variety of options and choose the one that suits your needs the best and fulfills your requirement.
If you are new to the concept of cash credit loans and need to know more about this type of loan before applying for one or searching for loan options, then this article is just for you. In this article, we will be sharing details about cash credit loans with you. We will look at this type of loan in-depth and understand all major aspects of the same. By the end of this guide on cash credit loans, you will be familiar with the features of a cash credit loan, the benefits of a cash credit loan, how to apply for cash credit loans online, and much more.
Table of Contents
In the upcoming sections of this article, we will be taking you through the following topics related to cash credit loans:
- What is Loaney?
- What is a cash credit loan?
- Important features of cash credit loans
- Examples of cash credit loans
- Cash credit loan interests and rates
- Advantages and disadvantages of cash credit loans
- How to apply for cash credit loans?
Towards the end of this article, we have answered a few commonly asked questions related to cash credit loans to help you clear any doubts that you would have.
What Is Loaney?
The world is getting increasingly digitalized. Everybody is online on the internet these days. Well, when we say this, we are talking of all the services and facilities that have made their place in the digital space. We are living in the era of the internet and it is one of the benefits of the internet that we can find most of our essential services and get most tasks done so easily. Internet banking and digital financial services too have made an impactful place for themselves on the internet and proved beneficial for all their clients and users. Similarly, loan borrowing has made a shift to the digital world, and one reliable and efficient platform for personal loans online is Loaney.
Loaney offers unsecured debt or personal loans to its clients. The interest rates are low and the loan can be easily repaid in the tenure of about two months. The client does not need much documentation to avail of a loan. As mentioned above, the loan is approved without submitting collateral. The applicant also does not need q guarantor to avail of this loan. The eligibility criteria are simple and the loan application gets approved within a few minutes. Loaney offers loans of small amounts and also ensures that client data is 100% safe and secure with the portal.
What Is A Cash Credit Loan?
Let us now jump to our main topic and understand what a cash credit loan is.
A cash credit loan is offered by banks and moneylenders to companies and businesses. This type of loan is a short-term funding option that is offered for a period of up to 12 months. Businesses need cash regularly for their operations and a cash credit loan is a type of working capital. This loan can be used for the everyday expenses of a business. A cash credit loan from a bank allows the company to withdraw funds from an account as many times as required but the amount that can be withdrawn cannot cross the withdrawal limit. The limit is decided by the bank based on the company’s records and credit history.
The cash credit loans offered by banks are secured debt and are offered against security. This can be in the form of raw materials, finished goods, equipment, property, stock in trade or even fixed assets. The interest on cash credit loans is charged on the amount that has been borrowed by the company and not the amount set as the borrowing limit.
Let us move further and look at more details about a cash credit loan and understand the features of this type of loan.
Important Features Of a Cash Credit Loan
The features of a cash credit loan are as follows:
- The duration of a cash credit loan is up to 12 months and it is a short-term funding option.
- The interest rate charged by your bank or money lender is charged on the amount you have withdrawn and not on the total fixed limit.
- The interest that you pay on your cash credit loan is tax-deductible.
- The money from your account can be withdrawn as many times as you need but the amount withdrawn should not cross the sanctioned limit.
- The limit is set by the lender based on the company’s credit history. You can avail of a higher borrowing limit if you have an exemplary credit history and very high CIBIL scores.
- A cash credit loan is offered against security. It is not a type of unsecured debt.
- The repayment of a cash credit loan is flexible and the loan can be paid back in monthly, quarterly, or yearly installments.
- There is a minimum commission charge that needs to be paid even if the borrowed amount is used or not.
These are a few salient features of a cash credit loan. Further in this article, we will be taking a look at the cash credit loan examples, the procedure of applying for a cash credit loan, the interest rates, and eligibility criteria for the same.
Examples Of Cash Credit Loans
In this section, we will be taking a look at examples of situations where the amount borrowed from a cash credit loan can be used by a company. The lender does not ask for a reason for borrowing from the applicant and so the funds can be used for different purposes. A cash credit loan helps in bridging the working capital gap. The amount that is withdrawn by a company as a cash credit loan can be used for a variety of purposes such as:
- Procuring raw materials and fuels
- Investing in new machinery
- Settling previously borrowed debts
- Paying salaries to the employees and paying labor wages
- Bill payments
- Renting storage spaces, new offices, warehouses, etc
Listed above are a few examples of how a cash credit loan can be used by a business. Let us move ahead and look at some more important details of borrowing a cash credit loan.
Cash Credit Loan Interests & Rates
In this section, we will be sharing with you the interest rates, the document requirement, and the eligibility criteria to qualify for applying for a cash credit loan.
The interest rates of a cash credit loan will vary depending on the bank you choose to borrow the loan from. It might also be influenced by the applicant’s credit reports and the relations with the bank.
The eligibility criteria for borrowing a cash credit loan include the age of the business owner. The applicant must be between the age of 24 to 70. The credit score or CIBIL score of the applicant must be at least 685. The higher the score is, the better the chances of qualifying for a cash credit loan and a higher borrowing limit. Cash credit loans are offered to companies, businesses, and enterprises. To be eligible for a cash credit loan, the applicant must be a business owner with 3 years of minimum vintage.
The documents that will be required by the applicant, to avail of a cash credit loan include the filled application form with passport size photos, business PAN card, KYC documents, last 6 months’ bank statement, the business incorporation certificate, business address, and ownership proof and details of the collateral being submitted.
Advantages & Disadvantages Of A Cash Credit Loan
Before you move forward and apply for a cash credit loan, you must also weigh the pros and cons of this type of loan. In this section our guide on the features of a cash credit loan, we will be analyzing the advantages and disadvantages of borrowing a cash credit loan. This will help you understand cash credit loans better and make a choice depending on these factors. It will also give you a clear view of how this loan can be beneficial for your company or if it is not suitable for your business.
|The interest rate is applicable only on the amount withdrawn by the business and not the total withdrawal limit.||A cash credit loan is offered to businesses and enterprises at a higher rate of interest.|
|The company can avail of funds for their need without having to liquidate their assets.||A cash credit loan is a short-term loan and hence cannot serve the business for a long period. Every time the loan is renewed, the terms and conditions can be re-evaluated, including the interest rate.|
|The interest paid on this type of loan is tax-deductible.||This loan is suitable for businesses and companies with 3 years of vintage and so it becomes difficult for startups and comparatively newer companies to avail of the same.|
|The business can withdraw money as many times as required from this type of loan.||The minimum commitment charge has to be paid regardless of the funds being utilized or not.|
How To Apply For Cash Credit Loans?
To apply for a cash credit loan, you must visit the website of the bank from where you need to borrow the loan or contact the customer care department of the bank. You can find the further steps on the net banking website or the customer service executive will guide you with the procedure.
1. How to calculate the interest rate for cash credits?
To calculate the interest rates for a cash credit loan, you must visit the net banking site of your chosen money lender or use the interest calculators available online.
2. What is the loan amount offered for the Cash credit scheme?
The loan amount offered varies from one bank to another and it can also vary spending on the credit history of the business borrowing the loan.
3. What are fees associated with cash credit loans?
The fees associated with a cash credit loan include processing charges, defaulting penalties, bounce charges, and document processing fees.