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.