When you require working capital limit for your business, you have two options either to opt for overdraft facility or OD limit from bank or NBFC or to opt for CC limit from bank. Overdraft facility or OD limit can be provided by bank or NBFC but CC limit facility or cash credit limit provided by bank only. Primary security mortgaged by the bank or NBFC for overdraft facility is assets of the borrower but in CC limit primary security is stock and debtors of the company

CASH CREDIT OR CC LIMIT

Cash credit limit or CC limit is a kind of current account with cheque book facility. Cash credit limit or CC limit sanctioned by the bank to the small medium enterprises (SME) to fulfill their working capital requirements. CC limit holders offers stock and debtors as primary security to the bank. A CC limit or cash credit limit allows you to withdraw money or issue cheque up to the approved CC limit, even if there is no balance in the account. It is a short term credit facility generally for 12 month, which is renewable after every 12 months.

The cash credit limit loan in Delhi or CC limit is the maximum amount that you can overdraw from bank. However the drawing limit is specified by the bank. Borrower has to pay interest on utilized amount only, not on limit sanction. Interest is calculated on daily overdrawn balance and debited to the cash credit or CC account monthly.

Whatever amount you repay into the cash credit or CC account, you can withdraw it again as long as the limit is not over utilized. That’s why Cash credit limit or CC limit facility is also called revolving credit facility.

When a businessman requires fund for his business, he has two options either to opt for long term funding from bank or NBFC by taking loan against property or term loan against property or to opt for short term funding usually for one year by taking overdraft limit (OD Limit) or cash credit limit (CC Limit). Long term funding like loan against property carries lower rate of interest in comparison to short term funding like OD Limit or overdraft limit. However borrower can save interest on OD limit by depositing extra money in the overdraft account and thus paying interest only for amount utilized.

Overdraft or OD LIMIT

An overdraft limit is a loan amount sanctioned by the bank or NBFC to the borrower to meet his business requirements. OD limit is like a current account. An OD facility allows you to withdraw money or issue cheque up to the approved OD limit, even if there is no balance in the account. It is a short term credit facility generally for 12 month, which is renewable after every 12 months.

The overdraft limit or OD limit is the maximum amount that you can overdraw from bank or NBFC. Borrower has to pay interest on utilized amount only. Interest is calculated on daily overdrawn balance and debited to the OD account monthly.

Whatever amount you repay into the overdraft account, you can withdraw it again as long as the limit is not over utilized. That’s why OD limit or overdraft facility is also called revolving credit facility.