For a business to run smoothly, it needs adequate liquid funds. However, businesses sometimes face a cash crunch and need urgent funds to meet their financial requirements. To address this, banks and financial institutions provide short-term loans in cash credits. This product allows companies to borrow money without a credit balance up to a certain limit. Read on to understand the meaning of a cash credit account and how it can help meet short-term business expenses.                                                                   A cash credit is a drawing account against credit limit granted by the Bank and is operated in almost the same manner as a Overdraft account.
The distinction between an Overdraft and a Cash Credit is in the nature of the security.
When the advance is secured by the pledge/hypothecation of goods or produce, it is treated as a Cash Credit Account.
The security may be changed from time to time according to the borrower’s business requirement provided it always fully covers the balance outstanding the account (with the stipulated margin).