Understand the difference between Cash Credit and Overdraft - PowerPoint PPT Presentation
Title:
Understand the difference between Cash Credit and Overdraft
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To run a successful business, you must always have sufficient funds to meet your operational expenses. In the event of a cash crunch, financial institutions now provide a variety of financing choices to assist you with your funding needs. Among these alternatives, cash credit loans and overdraft facilities are two of the most regularly used loan products. Though most people mistakenly believe that both of these products are identical, they are actually quite distinct. – PowerPoint PPT presentation
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Title: Understand the difference between Cash Credit and Overdraft
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Understand the difference between Cash Credit and
Overdraft
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What does cash credit mean?
- It's short term funding that helps businesses to
meet their working capital needs.
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Know how cash credit works
- Available for a maximum period of 12 months.
- You can withdraw funds above the account's
available balance. - You need to renew the cash credit account after
the term concludes.
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Key features of cash credit
- Available exclusively for businesses and after
putting up collateral. - Pre-specified terms and conditions.
- No restrictions on the number of transactions.
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What does overdraft facility mean?
- You can overdraw from your account up to a
certain limit. - Overdraft limit is pre-approved.
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Know how overdraft facility works
- Overdraft increases your account's outstanding
balance. - Partial repayment option is available.
- Following your repayment, you can again overdraw
from your account.
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Key features of overdraft facility
- Also available on a joint account.
- Fee is applicable on the overdrawn amount.
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Key distinctions between cash credit and overdraft
- Cash credit is solely offered to enterprises,
while overdraft is open to both businesses and
individuals. - Cash credit is based on inventory availability,
whereas overdraft is based on the lender-borrower
relationship. - Cash credit is available at a lower interest rate
than overdraft facility.
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1.
Similarities between cash credit and overdraft
- Interest calculation method and repayment pattern
are same for both.
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- Both these funding alternatives have their own
merits. Evaluate them thoroughly before making
any decision.
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Hero Fincorp Limited
09, Basant Lok, Vasant Vihar, New Delhi -
110057
Tel 18001024145
Email corporate_at_herofincorp.com
Website https//www.herofincorp.com/
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