CASH CREDIT

Suppose there is a manufacturing entity which manufactures a certain products. In order to do that the entity has to procure raw material from another vendor. The raw material is processed and the finished goods are ready. How, these finished goods are not immediately sold. Hence, the entity’s capital is stuck in inventory in the form of raw material, work-in-progress and finished goods. After finished goods are sold, payments are not realised immediately and certain funds are blocked in receivables/debtors. As such, the entire cycle from procurement of raw material to final realisation of cash takes time and this is called working capital cycle. Meanwhile, the entity has to meet its day to day operating expenses to run the unit and cannot wait for the inventory to convert into cash. What should the entity do in such situation?

Janakalyan Bank has an easy solution for you – CASH CREDIT FACILITY.

The entity can meet all its commitments without waiting for completion of working capital cycle as mentioned above by availing Cash Credit facility.

WHAT IS CASH CREDIT FACILITY?

A Cash Credit facility is a short-term financing arrangement provided to an entity by the bank. A borrowing limit is set by the bank on the cash-credit facility of such entity and the entity can utilise the facility maximum up to the sanctioned limit. Basically, it means, a entity can make payment to its creditors/suppliers, make utility payments, salary and other operating expenses without maintaining credit balance and the interest is charged on the actual borrowed amount.

BENEFITS OF CASH CREDIT FACILITY

A cash credit facility is essential for meeting day to day working capital expenses of the entities.
The operations in cash credit account are flexible and borrower can deposit and withdraw the funds as per his convenience.
Important things to keep in mind when applying for Cash Credit facility –
To avail cash credit facility a borrower has to provide his financials, income-tax returns and some tangible collateral security.
The value of the collateral can help to negotiate interest rate. Hence, the larger the value of collateral, lower the interest rate.
The cash credit facility is offered on running credit basis.
Every year the bank reviews the track record of the conduct in the cash-credit account and renews the limit. Bank can change the terms & conditions of the cash credit account at the time of renewal depending on the performance of the entity. The borrower can bargain for competitive terms if it maintains the good track record, provide substantial collateral security etc.

Cash Credit facility is one of the popular and convenient working capital option for small traders, manufacturers, service providers and professionals. To know more and to apply for cash credit facility, visit your nearest Janakalyan Bank branch today.