A Secured Cash Credit is a short-term source of financing for a company. OR Cash credit is a short-term loan extended to a company. It enables a company to withdraw money from a bank account without keeping a credit balance. The account is limited to only borrowing up to the borrowing limit. Also, interest is charged on the amount borrowed and not the borrowing limit.
Advantage
Source of working capital financing A cash credit is an important source of working capital financing, as the company need not worry about liquidity issues.
Easy arrangement It can be easily arranged by a bank, provided that collateral security is available to be pledged and the realizable value of such is easily determined.
Tax-deductible Interest payments made are tax-deductible and, thus, reduce the overall tax burden on the company.