Getting instant financial support might be essential for a person having a fixed salary or self-employed associated with the business. The small and larger companies might have similar requirements. Considering such requirements and understanding the significance of the time, banks offer cash credit based on the credit score and creditworthiness of the company and as per their turnover and capability to repay the amount, cash credit is approved with some limit. After the approval, the person can borrow as a short-term personal loan at any time within that limit.
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What is cash credit
Cash credit is the financial support which is offered to businesses by banks and a certain limit is approved for the business as per their credit score, financial status and business record, and therefore cash credit is an ensured financial support which can be obtained at any time for any purpose whether for the capital support, inventory management or for other reason invariably associated to the business. The best thing about cash credit is that it can be borrowed at any time and the time consumption is much less due to prior approval of the instant loan with a satisfactory verification. It is beneficial due to various features such as the interest rate applied on the used amount, not on the approved amount; therefore, you are free to use the desired amount within the limit.
Cash Credit Loan Interest Rate
The interest rate on the cash credit loan depends on various circumstances where you can get the lower interest on the higher loan amount, especially with the higher CIBIL score. Similarly, your interest may be higher with the longer tenure. Ultimately, the interest can vary on the lender’s policies, such as each lender’s terms and conditions rate of interest and processing fees, etc. So, each term and condition can be as follows:
Loan amount: the interest on a higher loan amount may be slightly less
Credit Score: As per the financial transaction and credit score, the interest rate matters where your higher credit score helps you get the cash credit with the lower interest. Therefore for better financial assistance in future, you must focus on how to improve your credit score
Tenure: It is often provided for the shorter tenure which is beneficial because the longer tenure can enhance the repayment amount including higher interest.
Lenders policies: the most effective thing about the interet is that, it can be different based on the lender’s terms and conditions
Beneficial Features of Cash Credit
- Multiple Withdrawl
The credit limit allows you to withdraw multiple times within the credit limit and you can choose the credit facilities at any time which doesn’t require approval at each time.
- Tax Benefits
The credit facilities help you get the tax benefits especially while paying the income tax on your business and you can use it for the exemptions in tax amount as per the rules.
- Instant financial support
For any financial requirements, you can get instant financial support and therefore you can do it easily.
- Competitive interest
The competitive interest on the loan amount helps you manage the financial crisis easily and you can repay the amount easily.
- Flexible Repayment Option
The repayment options help you choose your tenure at your convenience, and you can close the loan easily to get the better options.
- Easily Accessible
It’s an easily accessible phenomenon that helps you get a loan at any time, especially when you need cash.
How Cash Credit Works
The cash credit works based on different levels, where, initially the borrower has to get the approval based on the credit score and business records and considering all these, the lender approves the maximum limit of the cash credit. After the approval, the lender can withdraw the cash within the approved limit
Documents required for the cash credit are
- Aadhar of the owner
- PAN card of business/company
- ITR
- Bank Statement
- Address Proof
- Business Record
- List of Assets ( In case of collateral)
- GST Registration Details
How to Apply for Cash Credit
- To apply for cash credit with the banks follow the different steps
- Go to the website of the lenders where you are going to apply for cash credit
- Apply with the aforementioned documents and identity proof
- Get the approval for the sanctioned amount
- Borrow the amount within the limit
- As per the tenure, repay the loan amount
Pros and Cons of Cash Credit
Pros
- Easy accessible
- No need to get approval each time
- Lower interest with a high credit score
- Easy and flexible repayment option
Cons
- The tenure may be shorter
- For the lower credit score, interest might be higher
- Need a keen financial planning to get rid of defaults that can hamper the credit score.
Eligibility criteria of cash credit
The eligibility criteria for the cash credit depends on multiple factors such as credit score, the financial strength of the business, the worth of types of equipment, etc.
- Credit Score: it must be higher
- ITR: the company must have a desired ITR value
- GST: All the registration must be up to date
- Worth of Equipment; The types of equipment must have the desired market value for the loan approval.
- Documents: All the documents must be there while applying for the loan like Aadhar, PAN, Salary slip, etc.
Conclusion
With its enormous features and benefits, cash credit has become one of the best choices for business people to ensure instant financial support for multiple needs of the business which may be either for capital support, inventory management, or for the payment of employees. It is approved after checking all the documents and eligibility criteria of the borrowers. Once the amount of the loan is approved, the borrower can use the cash for multiple purposes and for that they don’t have to get approval each time like short-term personal loan. Their repayment on time makes them eligible to borrow again.
Frequently asked questions for cash Credit
Ans. You can search the lenders and through the lender’s website, you can apply for the cash credit where you must have all the documents and then get the approval for the amount to borrow.
Ans. It has enormous features and benefits like lower interest, easy accessibility, and multiple times borrowing.
Ans. It is approved based on the creditworthiness of borrowers and after the approval, the borrower can get the loan anytime within that limit. Whereas, for the short-term personal loan, you have to go through the application process and approval each time.
Ans. The interest rate is applied to the utilized credit score and you can choose the amount as per your need. However, the processing fees can be applicable to the loan amount also.
Ans. The documents required for the cash credit are slightly different from the short-term personal loan, where you must have Aadhar, PAN, ITR, Bank statement, GST registration, and address proof of your business.