Different between cash credit and term loan?
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Cash credit is a revolving credit facility where you can borrow funds up to a certain limit as needed, with interest charged only on the amount used. Term loan is a lump sum borrowed amount with fixed repayment schedule and interest charged on the entire loan amount from the beginning.
Cash credit allows flexible withdrawals from a credit line, while term loans provide a lump sum upfront. Cash credit is short-term and part of working capital, while term loans have fixed amounts, interest rates, and repayment schedules.
This both loans are for finance, but they work and structured differently.
Cash credit is like a flexible pot of money you can dip into whenever you need, and you pay back what you borrow whenever you can. It’s handy for managing short-term expenses or sudden costs, like fixing equipment or covering bills.
A term loan is like borrowing a set amount of money for a specific purpose, such as buying a house or a car. You get the money upfront, and then you pay it back over time with interest, usually in regular installments. Term loans are great for bigger things like expanding a business or buying expensive equipment.