Distinguish between
Cash Credits and Overdraft Facility.
Cash Credits and Overdraft Facility.
The
difference between cash credits and overdraft facility is as follow:
1. A Cash Credit (CC) is a short-term
source of financing for a company which enables a company to withdraw
money from a bank account without keeping a credit balance in it but
only after providing the required security as collateral whereas Overdraft
refers to a continuous withdrawing facility in which the bank allows the
customer to withdraw amount more than what he holds to his credit, but only up
to a certain extent.
2. For availing cash credit facility, the borrower must have
a cash credit account with the bank or financial institution whereas to avail
overdraft facility, the borrower must have a current account with the bank.
3. Cash credit facility is given against the pledge of
inventory or other current assets or collateral security of the company whereas
Overdraft facility is given against the security of fixed assets.
The difference between cash credits and overdraft facility is as follow:
1. A Cash Credit (CC) is a short-term source of financing for a company which enables a company to withdraw money from a bank account without keeping a credit balance in it but only after providing the required security as collateral whereas Overdraft refers to a continuous withdrawing facility in which the bank allows the customer to withdraw amount more than what he holds to his credit, but only up to a certain extent.
2. For availing cash credit facility, the borrower must have a cash credit account with the bank or financial institution whereas to avail overdraft facility, the borrower must have a current account with the bank.
3. Cash credit facility is given against the pledge of inventory or other current assets or collateral security of the company whereas Overdraft facility is given against the security of fixed assets.
