A cash credit loan is one of the most popular funding options for businesses that need quick working capital. This short-term loan allows borrowers to withdraw funds up to a pre-approved limit and pay interest only on the amount utilized. It is widely used by MSMEs, startups, traders, and service-based businesses to manage daily financial needs smoothly.
Advantages of Cash Credit Loan
A cash credit loan offers multiple benefits that make it a preferred choice for businesses:
- No collateral required in many cases
- No CIBIL score check needed for some lenders
- Interest paid is tax-deductible, reducing your financial burden
- Quick and easily accessible, with high flexibility
- Interest charged only on the withdrawn amount
- A reliable source of working capital financing
- Easy arrangement through banks and NBFCs
Disadvantages of Cash Credit Loan
Along with advantages, a cash credit loan also has certain limitations:
- High rate of interest compared to term loans
- Short repayment period, usually 12 months
- Difficult to avail for startups without financial history
- Used mainly for working capital needs, not long-term projects
- Minimum commitment charges may apply
- Difficulty in securing if proper documentation is not available
Documents Required for Cash Credit Loan
To apply for a cash credit loan, lenders generally require the following documents:
- Duly filled application form
- Business plan or project report
- Copy of PAN card
- Passport-size photographs
- Identity proof: Passport, Driver’s License, Voter ID
- Residence proof: Voter ID, Driving License, Passport, Ration Card, Telephone Bill
- Income proof: Last 6 months’ bank statement + last 3 years’ audited financials
- Last 2 years’ ITR + current year’s GST returns
- Business proof: Incorporation certificate, sales tax registration, rent agreement
- Business address proof: Property papers, house tax documents, electricity bill
- Details of collateral (if required)
- Details of existing loans with repayment schedule
- Partnership deed / Memorandum of Articles (MoA)
- Valid trade license
- Shop & Establishment Act certificate
- GST registration certificate
Who Can Avail a Cash Credit Loan?
A cash credit loan can be availed by:
Individuals, professionals, entrepreneurs, companies, partnerships, LLPs, cooperative societies, and registered trusts engaged in manufacturing, trading, or services under the MSME category.
Conclusion
If you’re planning to apply for a cash credit loan but struggling to prepare a project report, Finline is here to help. Finline is a smart tool that lets you create a bank-approved project report in just 10 minutes—available in your preferred language. Their reports are accepted by all major public and private sector banks across India.
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