Cash Credit limit, New OCC, Increase existing CC
Evolve your business with bank loans, Bank limit, tips to get new CC limit as well as increase your existing CC limit
Cash Credit limit: When you require working capital (Funds to run business) limit for your business, you have two options either to opt for overdraft facility or OD limit from bank or Non Banking Financial Company (NBFC) or to opt for Cash Credit (CC) limit from bank. Cash credit limit or CC limit is a kind of current account with cheque book facility, in which a limit of a certain amount is fixed which you can withdraw for your business expenses like purchasing raw material, operating expenses and other related expenditure. It is a short term credit facility generally for 12 months, which is renewable after every 12 months. You have to pay interest on the amount utilized and for a period in which the amount is used, at the end of the month.
All the CC limits are provided against security which can be majorly 3 types.
1. Primary Security – Stock or Book Debt
2. Collateral Security – Property, Gold, Fixed Deposit or other acceptable security to lender
3. Government Schematic Guarantee – e.g. Credit Guarantee Schemes.
Government Business loan Schemes
Unsecured Business loans in India
https://bankwire.in/category/goods-and-service-tax-gst/
Why should you opt for availing Cash Credit limit?
There are a number of reasons to avail a CC limit facility rather than using your own funds or when you don’t have funds.
1. Working Capital Requirement Of The Business: Business expenses like employee salary, commission, payment to your creditors, buy goods etc.
2. To Meet Unexpected Business Expenses: Expenses such as road accident, death of an employee, government policies, hike in rates, taxes and fees, strike etc.
3. As A Tool For Seasonal Business: For a business involved in Cold Drinks, Ice Cream, candle or light business, warm clothes business, etc.
Credit Card Bill Minimum due amount impact
What are the documents required for availing a Cash Credit limit?
To avail this facility you need documents related to your identity, business and security. List of the documents is given below which are generally required by banks –
- KYC Documents of proprietor
- Copy of VAT/ Sales Tax, GST, Import-Export or any other registration Certificate
- Latest Office Address proof i.e. electricity bill, rent agreement etc.
- Letterhead of the firm
- Latest 3 year ITR with computation of Income including P & L a/c, balance sheet with their schedule and annexures (For large amount duly certified/ Audited by CA)
- Form No. 3 CA & 3 CD in case of audited balance sheet
- VAT/ Sales Tax/ GST return copies
- One year up to date all the saving and current account statement
- Property documents if property is offered as security
- Statement of Stock or book debt
Top 6 Latest GST News And Developments
Everything about GST – Goods and Services Tax
GSTN: Goods and Service Tax Network, All Info
How to get the Cash Credit limit easily?
If you are going to avail this facility, you can approach a bank or NBFC. It is not necessary to hire a CA or accountant to avail the limit. However, hiring a professional may make your task easier and you can focus on your business. Banks may also help you in collecting documents and preparing a financial statement. If the amount of the limit is less than 10 lakhs, not much documentation is required and collateral security may be avoided by the lender. In place of collateral security the limit can be granted against the Government of India scheme like Mudra Yojana.
Important things to keep in mind while availing a limit for business
You should always enquire about few things while opting this facility, as mentioned below –
1. Charges applicable during the year on the CC limit
2. Interest rate applicable
3. Renewal Fee after one year
4. Extra Documents required
5. Procedure when you close the limit and related expenses
6. Terms and conditions.
Eway Bill, E Way Bill System, Generate E way Bill Rules
Capital Gain Tax & Rates in India, Capital Assets, Rules
What is the rate of interest of OCC or CC limit?
The rate of interest on cash credit or CC limit varies in between 10% p.a. to 18% p.a. It is always advisable to compare cash credit or CC limit interest rates of different banks and choose the best one which suits your needs.
How to increase the current Cash Credit limit with banks?
If you have already availed a CC limit facility and you want to increase it you can follow the steps given below –
1. You need to maintain the turnover of your business in your CC limit account. More turnover means more chances to increase the limit amount.
2. Maintain documents of financial transactions in order and ready to provide to the bank when needed.
3. Timely payment of your taxes like GST and getting receipt of the same
4. Maintain your credit score (CIBIL) well (click here to know more).
5. Offer more security to avail higher amounts if your business transactions are sufficient.
6. Take a help of professional like CA, Accountant,
7. Get your balance sheet audited. Maintain transparency in expenses from limited accounts and business.
8. Maintain good reputation of your business
9. Renew your exiting limit on time and avoid penalty
10. Keep getting information about new schemes of the government and banks.
To conclude, there are many advantages of taking a cash credit which is one of the best financing methods, especially for short-term needs. Still, the borrower should cautiously assess its pros and cons, keeping in mind his business needs and current situation to be sure of the loan’s feasibility to the business. The borrower should also keep a watch on the levels of his current assets and business performance for smooth renewals.
Important Links:
Read Category-wise posts
Banking | Bank Account | Bank Deposit Schemes | Loans | Bank Cards | Credit Cards | Debit Cards | Search IFSC & MCLR Code | Insurance | Bank Jobs and Exams | Stock Market | GST | EMI Calculator
