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Cash credit and overdraft facilities are valuable financial tools for businesses to manage short-term cash flow needs effectively. By providing flexible access to funds, these options help maintain liquidity, support operational efficiency, and enable businesses to respond swiftly to financial demands. Understanding their features, benefits, and differences can help businesses choose the right facility to meet their financial needs and support their growth strategies.

Cash credit and overdraft are flexible financing options that allow businesses to manage their short-term cash flow needs. Both facilities provide access to funds on a revolving basis, but they have distinct features and uses. This guide explores the details of cash credit and overdraft facilities, including their benefits, differences, eligibility criteria, and tips for effective utilization.

Term loans are a critical financing option for businesses looking to make substantial investments or manage significant financial needs. By providing access to large sums of capital with structured repayment plans, term loans can support business growth and long-term projects. Understanding the features, benefits, and requirements of term loans, along with careful planning and management, can help businesses leverage this financing option effectively to achieve their strategic goals.

Key Features of Term Loans

Fixed Loan Amount:

A term loan involves borrowing a specific amount of money, which is disbursed as a lump sum. Repayment Schedule:
The loan is repaid in regular installments (monthly, quarterly, etc.) over a predefined term, which can range from one year to several years.

Interest Rates:

Interest rates can be fixed or variable, affecting the total cost of the loan over its term. Secured or Unsecured: Term loans can be secured, requiring collateral, or unsecured, based on the borrower’s creditworthiness.

Letter of Credit (LOC) is a letter issued by one bank to another (usually one in a different country) that serves as a guarantee for payment to be made to a specified person under specified conditions.

A Letter of Credit (LC) is a financial instrument issued by a bank on behalf of a buyer, guaranteeing that a seller will receive payment for goods or services provided certain conditions are met. This tool is particularly vital in international trade, where buyers and sellers operate in different countries and may be unfamiliar with each other's creditworthiness and business practices.

A Letter of Credit is a crucial instrument in international trade, providing a secure and reliable method of payment that protects both buyers and sellers. By guaranteeing payment upon the fulfillment of contractual conditions, LCs enable smoother and more secure cross-border transactions, fostering global commerce and economic cooperation.

A Bank Guarantee (BG) is a promise made by a bank to cover a loss if a borrower defaults on a loan or fails to meet contractual obligations. This financial instrument is widely used in international trade, construction projects, and other business transactions to mitigate risk and build trust between parties.

  • Performance Guarantee: Ensures the completion of a project as per the agreed terms.
  • Financial Guarantee: Guarantees repayment of a loan or financial obligation.
  • Bid Bond Guarantee: Assures that the bidder will undertake the contract if awarded.
  • Advance Payment Guarantee: Protects the buyer if the seller does not deliver after receiving an advance payment.

A working capital loan assists businesses everyday funding as well as short-term operations. A working capital business loan can be utilized for the following purposes-

Procure raw materials

Purchase inventory

Pay for overhead costs like electricity, rent, salaries and other utilities

Finance blocked payments from debtors

Pay suppliers in advance

Maintain a healthy level of cash

It is very good for small and medium enterprises (SMEs) and is especially appropriate for seasonal or cyclical businesses that lack sustained or stable sales and require liquidity (cash in hand) to realize their everyday operating costs.

Such businesses produce during off-season and sell aggressively during the peak season. This means that they receive a large part of their payments during their peak season. They require funds during the off season to sustain operations. All such companies can opt for working capital loan for this purpose.

There might be several occasions when your business might require loan for working capital financing in small business:

Helps in managing sales fluctuations

Acts as a cash cushion

Readies your business to take up the bulk order

Stabilizes and boosts cash flow

Equips you to leverage business opportunities

To help in the growth of your, credfy.com offers easy working capital loans can be easily repaid.

Hassle-Free Loans Approved Within 24 hours

Relaxed eligibility criteria and a speedy loan application process make it easy to opt for working capital finance. credfy.com approves your working capital term loan application within a day.

Flexible Withdrawals and Repayments

credfy flexi loan is the best way to handle your dynamic business working capital requirement. It allows you to borrow and pay interest only what and when required. It allows you to repay the loan when payment is received at no pre-payment charge. This way you can reduce your loan for working capital EMIs by up to 45%.

Pre-approved offers

credfy offers pre-approved offers on your working capital loan application. This simplifies the loan process as well as helps in saving time. All you need to do is to share a few basic details and check your pre-approved offer.

Track your working capital loan online

Know your entire loan-related info with a simple online account. This includes outstanding balance, principal and interest statements and more. You can also request for additional funds or make payments towards your working capital loan through this account.