Cash Loan

• These loans are easy to avail.
• Quick processing and approval.
• Low interest rates and flexible tenures.
• These loans are specific and tailor-made for business needs.

Features of Cash Loans

• A security has to be given in order to avail this loan.
• Sole proprietors, partnership firms, private and public limited companies can apply.
• Banks allow an overdraft facility till the set limit.
• The loans are given at attractive interest rates, often lower than other forms of credit.
• The company can use this loan according to their requirements and expenses, be they for raw materials, equipment, machinery, etc.

Benefits of Cash Loans

• Provides working capital to businessmen, traders, etc.
• Lower interest rates mean more financial flexibility.
• This amount can be used for business expansion and other related purposes.
• The amount can be paid back over a period of time.
• The loan processing and approval are much quicker that other similar loans.

Limitations of Cash Loans

• Failure to repay could lead to loss of security. It is important not to depend solely on a cash loan as the primary source of funding. Credit from a cash loan should be used only when no other avenue is available.
• Money can be drawn up to the limit set by the bank. This also prevents a borrower from utilising the cash loan for major expenses. The cash loan is intended to cover the shortfall of funds. The limit discourages it from being misused.
• Businessmen with poor credit scores will find it difficult to avail this loan. If your credit score is low, you should work towards improving it first.

There are many banks that offer the cash credit loan facility such as ICICI Bank, HDFC, IDBI, Axis Bank, Oriental Bank of Commerce, etc.

• Cash Credit/Overdraft: This facility is provided by banks for the purpose of funding a business. This is primarily intended to provide working capital to the business thus allows it to grow. You can also use the funds to buy raw materials and other goods in order to fuel the business.
• Letter of Credit: These are bank guarantees issued by the bank. They are accepted globally and can be used for various business purposes. The bank has arrangements with other banks and this makes it easy for the business to make payments through this medium.
• Bank Guarantees: This is done on the behalf of a certain business. This sort of guarantee is essential in some areas for things like bidding for contracts and a lot of banks offer this facility.
• Buyers Credit: This loan is given by the bank for business purchases like raw materials, machinery, equipment, etc.
• Short-Term Finance: These are given according to a business’s requirement. The loans are structured in such a way that they help the business generate profit, so that they can comfortably pay back the loan within a short time.
• Packing Credit: This loan is offered to exporters. This capital is to be used for packaging and shipping purposes.
• Post-Shipment Limit: This loan is also offered to exporters in order to finance their expenses till the time they are able to receive their profits.
• Bill Discounting: This is primarily meant for short term finance. This service is available from the date of sale till the time the profit has been received.
• Structured Cash Flow Financing: These loans are offered to bridge the gap between cost and expenditure. Sometimes a business may not be able to balance its financing. This is where structured cash flow can be a life saver.

• The company should be based in India.
• A security has to be given in order to avail the loan.
• The company can be a sole proprietorship, partnership firm, private and public limited company.
• The company should be in operation for at least 3 years.
• The company should have a good relationship with the bank.

The applicant should have a good credit score.

• Filled-out application form.
• Company Profile: Information about the company. The products and services the company provides.
• Residence Proof: Electricity Bills/Lease Agreement/Water Bill
• In the case of a mortgaged property, original ownership papers of the property.
• Financial statement of the last 2 years.
• Income tax returns of the last 2 years.

ICICI Working Capital Finance: ICICI bank offers cash loans in the form of working capital finance. These loans can be used by companies for a variety of purposes such as matching their expenditure, buying raw materials, shipping and export purposes, etc.

Features of ICICI Working Capital Finance

• Collateral in the form of property or liquid security has to given in order to avail the loan.
• The loan can be used for export, packaging and shipping purposes.
• The loan can be availed by manufacturers, service providers, traders, retailers/wholesalers or individuals who are involved in import/export activities.
• The bank offers capital in the form of letters of credit and buyers credit for trade purposes.
• Bank guarantees are also given to fulfil financial obligations and needs.

Why ICICI Working Capital Finance

• The bank has over 3,000 branches at the service of their customers.
• Fast processing and availability of loan.
• The bank manager will work with you to help you meet all your needs.
• The bank offers low interest rates, commission and charges.

HDFC Working Capital Finance: HDFC is a prominent private sector that also offers working capital finance to companies. These loans act as financial solutions for companies that wish to grow but cannot due to lack of funds. These loans come at attractive interest rates and can be paid back over a period of time.

Eligibility Criteria for HDFC Working Capital Finance

• The annual turnover of the company should be between Rs. 7.5 crore to Rs. 200 crore.
• The company can be sole proprietorship, HUF, partnership firm, private or public ltd. co.
• The company should be in operation for at least 3 years.
• The company should have an asset/liability relationship with the bank for at least 6 months.
• The company is not listed in RBI’s defaulter list and does not have a negative credit score.
• The company should be on good terms with its existing banker.

Documents required for HDFC Working Capital Finance

• Filled up application form with annexure.
• Audited financial statements of the last 2 years.
• Income tax returns for the last 2 years.
• Sanction letter from the existing bank.
• Bank statement for the last 6 months.
• Copy of the property documents of the mortgaged property.
• Address proof in the form of the latest electricity/telephone bills.
• Government Registration Document of the company.

Security: A security in the form of property or liquid asset has to be deposited in order to avail the loan.

Offer Document: It is recommended that the applicant should go through the offer document and understand the nuances in the fine print of the loan agreement. If possible, they should consult a finance expert or advisor in order to better understand the loan.

Customer Specific: Cash loans have further been segmented in order to cater to the specific needs of the applicant. The bank offers guarantees, letters of credit, packaging credit, post shipment limit and other such facilities in order to cater to the company’s requirements.

Rate of Interest: Since a security has been deposited in order to avail the loan, the applicant can avail attractive interest rates. The loan can be paid back over a period of time with a comfortable tenure. The rate of interest in calculated on the basis of your financial history, loan amount and tenure for which the loan has been taken.

Credit Score: A credit score is the financial history of a company. Companies that make timely payments have a good credit score whereas companies with a bad score find it difficult to get a loan. Therefore, a company that wishes to apply for a cash loan must ensure that they have a good credit score.

Q. What is a cash loan?

A. A cash loan is a loan given to the companies in exchange of a security that has to be deposited with the bank. These loans can be withdrawn from time to time till the credit limit which is set by the bank. 

Q. What purposes can you use a cash loan for?

A. A cash loan can be used for a variety of purposes such as purchasing equipment, machinery, raw material, packaging, shipping, marketing, etc. These loans act as financial solutions for companies who wish to grow but do not have the requisite capital. 

Q. What sort of collateral has to be given in order to avail a cash loan?

A. Collateral in the form of property or liquid securities can be given in order to avail a cash loan.

Q. What kind of companies are eligible for cash loans?

A. In order to avail a loan, the said company must fall under one of these categories:

• Sole Proprietorship Firm
• Partnership Firm
• Private Limited Company
• Public Limited Company 

Q. Who will benefit from a cash loan?

A. Businessmen and traders or companies involved in import/export will benefit greatly from cash loans.

Q. What is the interest rate on cash loans?

A. The interest rates on cash loans are low. It is calculated on the basis of your financial history, loan amount and the tenure for which the loan has been taken. 

Q. What is a credit score and how does it affect cash loans?

A. A credit score is a measuring stick on which a company’s credit worthiness is ascertained. Companies with a good credit score easily manage to avail a loan and vice-versa. Banks often check a company’s credit score before approving their loan application. This applies to cash loans as well. 

Q. How are cash loans different from other loans?

A. Cash loans are loans meant for business purposes. They act as financial solutions which help companies solve their financial problems. A security has to be deposited so the interest rates are low and the tenures can be long. Most other open-ended loans or lines of credit do not need any collateral. But these loans carry a higher rate of interest and the tenures are also shorter. 

Q. What is the eligibility criteria for a cash loan?

A. Following is the eligibility criteria for a cash loan:

• The company should be based in India.
• It should be in operation for at least 3 years.
• A security has to be given in order to avail the loan.
• The company should have a good credit score.
• The company should have a good relationship with the bank.
• Sole proprietorship firm, partnership firm, private and public limited companies can apply.

Q. What are documents required for a cash loan?

A. The following documents are required:

• Filled-up application form.
• Company Profile- List of products and services offered by the company.
• Residence Proof- electricity bills/telephone bills/lease agreement.
• In case of mortgaged property, a copy of the ownership papers of the property.
• Financial statements of the last 2 years.
• Income tax returns of the past 2 years.