Understanding Cash Credit (CC) and Overdraft (OD) Facilities Businesses often need short-term financing solutions to effectively manage their working capital. Two common financial instruments that assist in this area are Cash Credit (CC) and Overdraft (OD). While both options provide flexibility in fund usage, they serve distinct purposes. Let’s delve into their key features and differences. What is Cash Credit (CC)? Cash Credit is a short-term financing option offered by banks to help businesses meet their working capital needs. It allows businesses to withdraw funds up to a sanctioned limit, even if their account balance is zero. The amount borrowed is usually secured against inventory, receivables, or other business assets. A significant benefit of CC is that interest is charged only on the amount utilized, rather than the entire sanctioned limit. Key Features of Cash Credit: – Purpose: Mainly intended to finance working capital needs. – Security: Requires collateral suc...
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