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CC/OD Limits

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Empower your business with flexible CC/OD limits — funds when you need them, freedom when you don’t

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Understanding CC/OD Limits in Finance

In business finance, Cash Credit (CC) and Overdraft (OD) facilities are short-term borrowing tools offered by financial institutions to help businesses manage working capital needs. These are revolving credit lines that offer flexibility in borrowing and repayment, helping businesses tackle liquidity challenges effectively.

Both facilities are essential for maintaining smooth operations, especially during periods of fluctuating cash flow. While they function similarly, they differ in terms of usage, security, and purpose. Understanding these distinctions is crucial for effective financial planning and debt management.

Key Features of CC/OD Limits

  • Revolving Credit: Businesses can borrow, repay, and borrow again within the sanctioned limit.
  • Interest on Utilized Amount: Interest is charged only on the amount actually used, not the full sanctioned limit.
  • Short-Term Use: Ideal for managing day-to-day operational expenses, not long-term investments.
  • Security: Often backed by collateral such as inventory, receivables, or fixed assets.
  • Flexible Repayment: Businesses can repay the amount anytime during the loan period.

Overview of Cash Credit

Aspect Details
Purpose Used to finance working capital and meet operational needs of a business.
Collateral Usually backed by assets such as stock, inventory, or receivables to secure the loan.
Account Type Typically operated through a specialized Cash Credit account for businesses.
Usage Flexibility The limit can be accessed repeatedly for ongoing financial needs, making it flexible for continuous use.
Repayment Terms There is no fixed repayment schedule, and repayments are made as per the business's cash flow or convenience.

Overview of Overdraft

Aspect Details
Purpose Used to manage temporary fund shortages or emergencies in day-to-day operations.
Collateral May be secured or unsecured, depending on the account holder’s relationship with the bank and perceived risk.
Account Type Operated through the current account, allowing for greater flexibility in withdrawals.
Usage Flexibility Drawings can be made even if the account balance is zero, providing flexibility for short-term liquidity issues.
Repayment Terms Repayments are flexible and typically do not involve fixed monthly payments (EMI); the timing depends on the agreement with the bank.

Eligibility Criteria

  • Businesses with a stable operational history (minimum 1–3 years)
  • Good credit score and financial track record
  • Availability of collateral (in most cases)
  • Valid KYC documents and financial statements

Benefits of Availing CC/OD Limits

  • Improved Liquidity: Helps businesses maintain a healthy cash flow.
  • Lower Interest Costs: Pay interest only on the used portion, reducing borrowing costs.
  • Quick Access to Funds: Immediate cash availability in times of need.
  • Customizable Limits: Limits can be enhanced based on business performance.

Conclusion

CC and OD limits are crucial financial tools for businesses seeking working capital support without long-term debt obligations. When managed effectively, they offer strategic liquidity, minimize interest burdens, and ensure continuity of operations. At Hiva Professionals, we guide businesses in understanding, applying for, and managing CC/OD facilities tailored to their financial needs.

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