Plan working capital around your cash cycle.
Cash credit and overdraft limits fund day-to-day operations — stock, receivables and supplier payments. Check an indicative picture of the limit and interest cost before you approach a lender.
Check your working capital / od eligibility
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What lenders look at
Working capital limits are usually sized from your turnover and how long cash stays tied up in stock and customer credit. Lenders review banking history, GST returns, financial statements and existing borrowings; some limits need security such as property, stock or receivables. Interest on an overdraft or cash credit is typically charged on the amount you actually use.
Turnover & operating cycle
Higher, steady sales and a shorter cycle between buying stock and collecting payment support larger limits.
Banking & GST record
Regular credits into a business current account and timely GST returns help lenders verify turnover.
Existing borrowings
Current EMIs and limits reduce the additional credit a business can comfortably service.
Security & renewal
Many limits are secured and reviewed every year; check renewal terms, charges and stock-statement requirements.
Documents lenders commonly ask for
- KYC of the owners, partners or directors
- Business registration and GST certificate
- GST returns and business bank statements
- ITRs and financial statements, usually for the last two years
- Stock and receivables statements, where the lender asks
A general list — each lender publishes its own requirements and may ask for more. Share documents only through the lender’s official channels.
Before you submit an application
- Work out how long cash is tied up in stock and receivables before deciding on a limit.
- Keep GST returns, bank statements and financial statements consistent with each other.
- Ask how interest, renewal fees and unused-limit charges are calculated.
- Plan for annual renewal and any stock or debtor statements the lender may need.
Want to try other numbers? Use the EMI calculator →
What is the difference between cash credit and an overdraft?
Both are running limits you draw from as needed. Cash credit is usually linked to stock and receivables; an overdraft may be secured by property, deposits or other assets. Terms vary by lender.
Do I pay interest on the full limit?
Interest is usually charged on the amount used, but some lenders charge fees on the sanctioned or unused limit. Check the sanction terms.
Can a new business get a working capital limit?
It can be harder without trading history; security, a co-applicant or a government-backed scheme may help. Lenders decide case by case.