What is Cash Credit? Working Capital? a CC Limit? Explained
Discover everything you need to know about Cash Credit (CC) facilities for MSMEs in India. From eligibility and interest rates to exactly how it compares with overdrafts and term loans.
What is Cash Credit? (Meaning & Definition)
A Cash Credit (CC) facility is a short-term working capital loan provided by banks and financial institutions to businesses (especially MSMEs) to meet their day-to-day operational expenses. Unlike a traditional term loan where you receive a lump sum, a cash credit account operates similarly to a revolving credit line.
With a cash credit facility, the bank sanctions a specific limit. You can withdraw funds as and when required up to this limit, and you only pay interest on the exact amount you withdraw, not the entire sanctioned limit. This makes it an incredibly cost-effective way to manage fluctuating cash flows, purchase inventory, and pay suppliers while waiting for your receivables to clear.
Crucially, Cash Credit is a secured facility. It is almost always backed by the hypothecation of your current assets—namely your unpaid stock (inventory) and book debts (accounts receivable).
Backed by Current Assets
Secured against your company's current assets like inventory (stock) and accounts receivable (book debts).
Revolving Credit Line
Deposit your daily sales and withdraw instantly to pay suppliers. Operates as a highly flexible revolving line.
Pay Interest on Usage Only
You only pay interest on the exact amount you withdraw from your CC limit, not the total sanctioned amount.