Cash Credit Drawing Power (DP) Calculator
What is my actual usable Cash Credit (CC) / Overdraft limit based on current paid stock and debtors?
Financial Inputs
The total sanctioned credit limit in your bank sanction letter.
Raw materials, WIP, and finished goods as per latest stock statement.
Unpaid trade payables against raw material supplies.
Invoices due from domestic buyers aged within sanctioned bank limits (usually <90 days).
Stipulated inventory margin in bank sanction letter (industry default is 25%).
Stipulated margin on receivables in sanction letter (industry default is 40%).
Effective Usable Drawal Limit
Based on your current stock and debtors, your total Drawing Power is ₹405 Lakh.
Computed Total Drawing Power
₹4.05 Cr
Net Paid Inventory
₹3.00 Cr
Inventory DP Contribution
₹2.25 Cr
Book Debt DP Contribution
₹1.80 Cr
Key Financial Takeaways
- Based on your current stock and debtors, your total Drawing Power is ₹405 Lakh.
- Against your sanctioned limit of ₹500 Lakh, your effective usable limit is ₹405 Lakh.
- You face an operational drawal gap of ₹95 Lakh due to debtor/stock margins.
Worked Case Study & Financial Impact
Worked Practical Example:
A business with ₹5.00 Cr sanctioned CC limit has ₹4.00 Cr stock and ₹1.00 Cr creditors (Paid stock = ₹3.00 Cr @ 25% margin = ₹2.25 Cr DP). Eligible debtors are ₹3.00 Cr @ 40% margin = ₹1.80 Cr DP. Total DP is ₹4.05 Cr. Despite a ₹5.00 Cr sanction, usable drawal is capped at ₹4.05 Cr.
Strategic Credit Meaning:
Banks will strictly block cheques or transfers if your outstanding balance exceeds your computed Drawing Power, even if your account is within the overall sanctioned limit.
Variables Influencing Your Credit Sanctions:
- Unpaid Creditors: Higher trade creditors directly reduce paid stock eligibility.
- Debtor Aging: Any invoice unpaid beyond 90 days is disqualified from DP computation.
- Margin Stipulations: Negotiating lower margin percentages (e.g. 20% on stock) directly frees up liquid cash.
Frequently Asked Questions
Why did my bank freeze my CC withdrawal even though I have not reached my sanctioned limit?
This occurs because of a "DP Deficit". If your stock levels dip or debtors cross 90 days, your calculated Drawing Power falls below the sanctioned limit. Banks legally cap drawings at computed DP.
Why are sundry creditors subtracted from stock?
Because trade creditors represent goods supplied but not yet paid for by your business. Lenders only permit hypothecation and financing against paid inventory.
How can our company increase its monthly Drawing Power?
Key strategies include: speeding up collections on >90-day invoices to bring them within eligibility, clearing trade payables, or negotiating lower margin haircuts backed by collateral.
Related Financial Calculators
View All Tools →Calculators on this platform provide indicative mathematical estimations based on industry-standard financial appraisal models (including Tandon Committee Method II, Nayak Turnover Method, and standard compound amortisation).
They do not constitute a formal facility sanction, credit commitment, or legal advisory from SME PAISA or any partner banking/NBFC institution. Final terms, interest margins, security stipulations, and credit sanctions remain strictly subject to formal credit appraisal, audited balance sheet verification, CMA Data assessment, and risk committee approval by institutional lenders.
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