Most businesses don’t run out of money because they’re unprofitable. They run out of money because cash comes in slower than it goes out. A cash credit facility is built exactly for that gap.
A cash credit (CC) facility is a short-term working capital facility sanctioned against your inventory and receivables. It gives you a running limit you can draw from, repay, and draw again — without applying for a fresh loan every time. This guide covers how it works, what it costs in 2026, and how to apply for one.
What Is a Cash Credit Facility and How Does It Work?
A cash credit facility is a revolving line of credit that a bank or NBFC sanctions against the value of your stock (inventory) and book debts (receivables). Unlike a working capital loan disbursed as a lump sum, a CC account works like a current account with a borrowing limit attached.
Here’s what makes it different from a term loan:
- You pay interest only on what you use. If your sanctioned limit is ₹50 lakh but you’ve drawn ₹20 lakh, interest is charged only on that ₹20 lakh — not the full limit.
- There’s no fixed EMI. You draw funds as needed for salaries, raw material purchases, or vendor payments, and repay as collections come in.
- The limit is reviewed annually, based on your stock statements, receivables ageing, and repayment track record.
This structure makes a CC facility one of the most efficient ways to fund the operating cycle — the gap between paying suppliers and getting paid by customers — for manufacturers, traders, and service businesses.
Cash Credit Interest Rate and Eligibility in 2026
Cash credit interest rates in India typically range between 9% and 16% per annum, depending on the lender, your business profile, and the Reserve Bank of India’s repo rate, which currently stands at 5.25% following the December 2025 policy revision. Most banks price CC limits using their MCLR plus a spread based on your risk profile.
| Parameter | Typical Range (2026) |
|---|---|
| Cash credit interest rate | 9% – 16% per annum |
| Minimum business vintage | 3 years (varies by lender) |
| Minimum annual turnover | ₹50 lakh and above (varies by lender) |
| Collateral | Inventory and receivables; some lenders need additional security |
| Limit renewal | Annual, based on stock statements and repayment record |
| Processing time | 7–21 working days |
Eligibility generally depends on:
- Business vintage and registration — an established, Udyam-registered MSME is viewed more favourably.
- Financial stability — audited balance sheets, bank statements, and income tax returns filed with the Income Tax Department for the last 2–3 years.
- Credit history — your CIBIL score and existing credit exposure across lenders.
- Drawing power — calculated from the value of stock and receivables you can pledge, after applying a margin.
If you’re unsure where you stand, CreditCares’ eligibility checker gives you an indicative view before you approach any bank, and the EMI calculator helps you model interest costs on a term-loan alternative if you’re comparing options.
Cash Credit vs Overdraft vs Working Capital Loan
These three facilities are often used interchangeably, but they solve slightly different problems. Here’s how they compare:
| Facility | Secured Against | Best For | Repayment Style |
|---|---|---|---|
| Cash Credit | Inventory and receivables | Businesses with stock-heavy operations (manufacturers, traders) | Revolving, interest on utilised amount |
| Overdraft Facility | Current account balance / fixed deposits / property | Businesses with fluctuating account balances and salary-linked accounts | Revolving, interest on overdrawn amount |
| Working Capital Loan | Varies — can be unsecured or secured | One-time funding for a specific working capital gap | Fixed EMI over a set tenure |
If your business holds significant stock and has receivables tied up with customers — common for manufacturers, distributors, and contractors — a cash credit facility is usually the better fit. If your funding need is more about smoothing out account balances or covering short, unpredictable gaps, an overdraft facility may be simpler to manage.
For businesses where receivables themselves are the bottleneck — large invoices pending from clients — invoice funding can be a faster way to unlock that specific cash, often alongside a CC limit.
How to Apply for a Cash Credit Facility: Step by Step
- Prepare your financials — recent stock statements, receivables ageing reports, bank statements, and audited financials for the last 2–3 years.
- Check your eligibility — use a free eligibility checker to estimate your likely CC limit based on turnover and stock value.
- Compare lenders — interest rates, margin requirements on stock/receivables, and renewal terms vary across banks and NBFCs.
- Submit your application — along with KYC documents, Udyam registration (if applicable), and security documents if additional collateral is required.
- Get your limit sanctioned and start drawing — once sanctioned, you can draw, repay, and redraw within the limit as your operating cycle requires.
For Businesses in Kolkata and West Bengal
For manufacturers, jute and textile traders, engineering units, and wholesalers across Kolkata, Howrah, and the industrial belts of North 24 Parganas, a cash credit facility is often the backbone of day-to-day operations. Stock-heavy businesses in areas like Burrabazar, Topsia, and the Howrah industrial zone routinely rely on CC limits to bridge the gap between buying raw materials and collecting payments from buyers.
Banks such as UCO Bank, Bank of Baroda, SBI, Axis Bank, and HDFC all offer cash credit facilities in West Bengal, but margin requirements on stock and receivables, and the documentation expected for limit renewal, differ from branch to branch. A loan against property in Kolkata can also be used to support or enhance an existing CC limit if your business needs additional collateral backing.
How CreditCares Helps You Get a Cash Credit Facility
CreditCares is a Kolkata-based loan consultant working with 80+ banks and NBFCs to help businesses secure the right cash credit facility — sized correctly against your actual stock and receivables, not just a generic estimate.
Here’s how we help:
- We review your stock statements, receivables, and financials to estimate a realistic drawing power before you approach any lender.
- We compare margin requirements, renewal terms, and interest rates across our lender network to find the most cost-effective option.
- You get a dedicated relationship manager to coordinate documentation and follow up on sanction and renewal timelines.
- CreditCares charges no upfront fee — you pay a small amount only after your cash credit facility is approved and disbursed.
If your working capital needs go beyond a CC limit — for instance, expansion-linked capex — our team can also guide you toward a project loan, MSME financing, or a loan against property as a complementary facility. Read more on our blog, or if you’re a CA or financial advisor, explore our loan partnership programme.
Frequently Asked Questions
What is a cash credit facility and how does it work?
A cash credit facility is a revolving credit limit sanctioned against your inventory and receivables. You draw funds as needed, repay as collections come in, and pay interest only on the amount you’ve actually used.
What is the interest rate on a cash credit facility in 2026?
Cash credit interest rates in 2026 generally range from 9% to 16% per annum, depending on the lender’s MCLR, your business profile, and the value of stock and receivables offered as security.
What is the difference between cash credit and an overdraft facility?
Cash credit is secured against inventory and receivables and suits stock-heavy businesses, while an overdraft facility is typically linked to your current account balance or fixed deposits and suits businesses with fluctuating account balances.
Who is eligible for a cash credit facility?
Eligibility generally requires a business vintage of around 3 years, a minimum annual turnover (often ₹50 lakh or more), audited financials, and sufficient stock or receivables to support a drawing limit.
Is collateral required for a cash credit facility?
Inventory and receivables themselves act as the primary security. Some lenders may also ask for additional collateral, such as property, depending on the limit requested and your credit profile.
How is the cash credit limit calculated?
The limit, known as drawing power, is calculated from the value of your stock and receivables after applying a margin set by the lender — typically reviewed and renewed annually.
Does CreditCares charge an upfront fee to arrange a cash credit facility?
No. CreditCares does not charge any upfront fee. A small service fee is collected only after your cash credit facility is sanctioned and disbursed.
If your daily operations are funded out of your own pocket while invoices and stock sit unconverted, a cash credit facility can fix that. Check your eligibility with CreditCares today — no upfront fees, just the right limit from the right lender. Contact CreditCares to get started.