{"id":6363,"date":"2020-09-10T10:15:01","date_gmt":"2020-09-10T10:15:01","guid":{"rendered":"https:\/\/kredx.com\/blog\/?p=6363"},"modified":"2023-10-26T05:52:24","modified_gmt":"2023-10-26T05:52:24","slug":"what-is-the-difference-between-cash-credit-and-overdraft","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/what-is-the-difference-between-cash-credit-and-overdraft\/","title":{"rendered":"What Is The Difference Between Cash Credit And Overdraft?"},"content":{"rendered":"\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t

Businesspersons and entrepreneurs must maintain healthy cash flow and optimum working capital<\/a> at all times to keep their enterprises operational.\u00a0<\/span><\/p>

However, that\u2019s easier said than done!<\/span><\/i><\/p>

Also, the goals of optimising inventory or business expansion might never see fruition unless there are sufficient funds available. This is the reason several financial institutions offer flexible options in the form of Cash Credits (CC) and Overdrafts (OD) to their prospective customers. The primary difference between <\/span>cash credit<\/b> and overdraft lies in how these are secured. Besides this, there are several other points of difference between them.<\/span><\/p>

So, if you are looking for flexible financing options to meet fleeting business requirements or to initiate your much-awaited dream of expanding operations, know all about CC and <\/span>overdraft<\/b> and the prominent differences between them before opting for one. <\/span><\/p>

What Is A Cash Credit (CC)?<\/b><\/h2>

Since <\/span>cash credit<\/b> and <\/span>overdraft<\/b> are both lines of credit facilities offered by lenders, it is rather easy to be confused. Cash credits are short-term financial solutions that a business house can avail by securing any tangible company asset. This could be raw materials from the inventory, stocks or even account statements. As opposed to OD, cash credits are generally offered to business houses and not individuals.<\/span><\/p>

What Are Overdraft Accounts?<\/b><\/h2>

Overdraft is an ideal and super flexible financing option for individuals as well as business owners, especially in unforeseeable emergencies. If you hold an OD or checking account, you are subject to overdraft protection. <\/span>What\u2019s that?<\/span><\/i><\/p>

If you run short of funds in your OD account to complete a transaction, the overdraft facility will cover the difference and let the balance drop to the negative side of the scale. This process of offering an emergency credit to the <\/span>overdraft <\/b>account holder, when the balance drops below zero, is called overdraft protection. Let\u2019s understand this with an example.<\/span><\/p>

Let us assume that you need to buy administrative IT equipment worth Rs. 2.5 Lakh. However, you have only Rs. 2.3 Lakh in your OD account. In such cases, you might be able to <\/span>overdraw <\/span><\/i>your account and the balance in your account after the transaction would be -Rs. 0.3 Lakh.<\/span><\/p>

Now that you know the basic idea of <\/span>cash credit<\/b> and <\/span>overdraft<\/b>, it is now time to discuss the key differences between the two.<\/span><\/p>

Differences: Cash Credits Vs Overdraft<\/b><\/h2>