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Types of Working Capital Financing

Fund based financing facilities

Cash credit
Cash credit refers to a system of financing where a borrower is provided a credit limit, which could be utilized by him for the purpose of his business. The limits are decided based on his overall credit requirement and the quantum of such requirement met through other instruments of financing (bills, short term loans, etc.). In case of SMEs where the term loan component is not mandatory, the bulk of the bank financing to a unit is in the form of cash credit.

Cash credit system is the most convenient from the point of the borrower as this provides him the maximum flexibility by allowing withdrawal and repayments at his convenience. Interest is charged only on the average utilization. However, a commitment charge is levied on the unutilized limits as the bank is committed to providing him financing when called upon.


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Working Capital Term Loan
Bills Financing
Export Financing

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