Shubham
To execute their everyday operations properly, all small and medium businesses require sufficient operating capital. When it comes to taking out a loan, businesses have two options: First is the long-term loans (small company loans, lines of credit, etc.), and second is the short-term flexible loans (like cash credit and overdraft)
Many businesspeople mistakenly believe that cash credit (CC) and overdraft (OD) are the same thing. While these two short-term loan options look to be identical, they are two entirely different financial solutions that cater to different needs. Let’s take a closer look at the distinctions between CC and OD in this blog post, so you can figure out which is best for your business.
What is cash credit?
Cash credit is a sort of short-term loan offered to businesses to help them manage their working capital needs. The money is credited to a different account that is neither current nor savings.
Key points:
- You are only allowed to utilize the funds for business purposes.
- To receive the money from the cash credit, you’ll need to open a new bank account.
- The number of transactions and checkbooks issued for the cash credit account is unlimited.
- Borrowers must present the profit and loss statement, balance sheet, GST filing, and other documentation once per quarter and annually.
- To obtain cash credit loans, most lenders demand the borrower to provide collateral.
- The loan can be repaid every day or weekly, depending on the lender’s terms and conditions.
What is an overdraft?
Overdraft is a facility given by banks to a limited number of consumers. It permits current account customers to withdraw more money than is available from their bank account. You can use this method to issue checks even if your account balance is insufficient.
Key points:
- Only reputable customers are eligible for an overdraft. Customers that have a good relationship with the bank and are in excellent financial standing are eligible for this service.
- This facility is charged by the bank. The amount of fees charged is determined by the additional amount you withdraw from your account and varies by bank.
Similarities between Cash Credit and Overdraft
- The lender’s Cash Credit and Overdraft interest rate are based on the amount of money used, not on the sanctioned amount or limit.
- The cash credit limit and the amount of the overdraft are repayable on demand.
- Both of these financial tools are offered as collateral for existing assets.
- In both circumstances, the loan limit and amount sanctioned remain set, and extra funds cannot be withdrawn.
- Amounts in excess of the sanctioned or available cash limit can be withdrawn.
Difference between Cash Credit and Overdraft
Cash Credit
- When compared to an overdraft, the interest rate is cheaper.
- On the hypothecation of stocks and goods, a cash credit loan can be obtained.
- Cash Credit does not deteriorate over time.
- A new account must be opened in order to receive Cash Credit.
- Cash Credit should only be used for business reasons, and the loan amount is determined by the stock and inventory volume.
- Cash credit loans are available for a minimum of one year.
- Individuals, retailers, traders, manufacturers, distributors, businesses, partnerships, sole proprietorships, LLPs, and other entities can apply for cash credit loans.
- Cash credit is granted based on the company’s success and the state of the market.
Overdraft
- The interest rate is higher in comparison.
- An overdraft can be obtained based on credit history, bank relationships, and investments such as FDs, insurance policies, and so on.
- Overdrafts can be utilized for a variety of purposes, including corporate needs.
- The amount of the loan is determined by financial statements and security deposits.
- In the event of an overdraft, there is a monthly reduction.
- On the applicant’s existing account, an overdraft facility is available (account holder)
- Overdrafts are available for a month or quarter at a time, with a maximum of one year.
- Only account holders of the relevant bank are eligible for an overdraft.
- The approval of an overdraft is based on financial data and credit history.
Endnote
Hopefully, the blog gives you the valuable insights needed to choose between cash credit and bank overdraft.
0
Shubham
Related Articles
With Cash App, you can link your account to Sutton Bank to receive direct deposits, such as paychecks, into your Cash App account. With Cash App, you can link your account to either of these banks to receive direct deposits, such as paychecks, into your Cash App account. How to find the Cash App bank name? To find your Cash App bank name and address, you can go to the “Cash” tab at the bottom of the screen. By following the steps above, you can easily find your bank name and address on the Cash App and set up a direct deposit feature to receive your payments directly into your Cash App account.
0
You will need to know the Cash App direct deposit bank name if you are using Cash App. You must enter Cash App bank name and address to get a cash deposit from a Cash App account. When you want to withdraw or deposit cash through the Cash App, you need to know the bank name and address. You can get this information by checking your Cash App account or initiating a Cash App 8's immediate deposit feature. The first step to finding your Cash App bank name and address is to sign in with your Cash App account.
0
Do you know the bank name and account number for Cash App? This article will tell you what is Cash App bank name. What is a Cash App bank name and address? There are two possible answers for Cash App bank name and address. If you have the Cash App and are having trouble making a deposit, you can find your Cash App bank name, routing, and account number using the app's banking section.
0
A Cash App bank name is essential to understand how the app works. Understanding your Cash App bank name and address is essential for processing auto payments and direct deposits. The Cash App app, which can be downloaded from the App Store or Play Store, allows users to see their bank accounts and balances. To find the Cash App bank name and routing number, you can check your bank statement or the website of your selected bank. Luckily, the Cash App app is a secure service that protects users from scammers.
0
So the Cash App bank name is Sutton and Lincoln Savings bank. To find out which bank is linked to your Cash App account for direct deposit, you can follow these steps:First, open the Cash App on your mobile device. Scroll down and tap “Cash” or “Bitcoin” (depending on what you want to deposit)Tap on “Deposit”You should see the bank account linked to your Cash App account. Remember that the bank account linked to the Cash App is used for direct deposit and other transactions like buying and selling stocks, so you must ensure that the bank details you’ve added are correct. To find the Cash App bank name, routing number, and account number on your account:Open the Cash App on your mobile device. Scroll down and tap “Cash” or “Bitcoin” (depending on what you want to deposit)Tap on “Deposit”You should see the bank account linked to your Cash App account. Remember that the bank account linked to the Cash App is used for direct deposit and other transactions like buying and selling stocks, so you must ensure that the bank details you’ve added are correct.
0
The Cash App bank name is usually found in the settings section of your Cash App account. The best way to find out your Cash App bank name is to know your bank’s name. Whenever you’re setting up direct deposit through Cash App, you’ll need to know your Cash App bank name. The Cash App bank name differs from the name of the bank you have your account with. To help you find your Cash App bank name, you can use the bank’s website or Google.
0
