📌 Key Takeaway: Comprehensive comparison of Overdraft (OD against FD/property) versus Cash Credit (CC against stock & debtors), monthly stock statements, and Drawing Power.
Working Capital Financing: CC vs OD
Cash Credit (CC) and Overdraft (OD) are revolving credit facilities where interest is charged ONLY on the daily utilized balance, not on the total sanctioned limit.
Key Operational Differences
- Cash Credit (CC): Secured against current assets (stock & debtors). Requires monthly submission of stock statements to calculate Drawing Power (DP = Paid Stock less 25% margin + Debtors less 40% margin).
- Overdraft (OD): Secured against Fixed Deposits (OD against FD) or immovable property with a fixed limit. No monthly stock statement needed.