Cash Credit loan(CC HYPO) is one of the most preferred modes of financing. This is a continuous credit limit allowed for trading as well as manufacturing/ assembling/ other value-adding units to procure and maintain the stock in trade for trading units and stock of raw material, work in process, and finished goods for manufacturing/ assembling/ other value-adding units.
Traders, industrialists and other borrowers avail of this finance to meet their working capital requirements because it is considered as an elastic mode of borrowing.
Read Also: IFIC Bank Aamar Bari home loan.
Features of Cash Credit Loan
1. This is a Continuous Loan.
2. Cash credit is a flexible system of lending under which the borrower has the option to withdraw the funds as and when required and to the extent of his needs.
3. It is normally sanctioned for a period of one year and secured by the security of some tangible assets or personal guarantee.
4. It may be renewed for a further period at the request of the customer with the direction of providing bank.
5. Stock in Trade remains under Customers lock and key
6. Bank applies interest.
7. Security of this loan will be hypothecation of stock in trade or stock in raw materials or Work in Process (WIP) and Finished Goods (FG).
Customer’s Eligibility for Cash Credit loan
01. Eligible customers are;
- Individual (Adult)
- Sole traders Firm/Proprietorship
- Partnership Firm
- Joint Stock Company
- Non-Trading Concern (Club, Society etc.)
- Govt./Autonomous Bodies
- NGOs.
02. Must be a growing Business Concern. 03. At Least 2 Years Business History. 04. Must be a Current Account Holder of the Bank. 05. Up-dated clean CIB Report.
Required Documents for availing Cash Credit Loan (CC HYPO)
The intending cash credit holder should submit the following documents; 01. NID 02. Stock Report 03. Trade License 04. Up to date Income Tax Clearance Certificate 05. Non-Encumbrance Certificate 06. Valuation Report of property
Security of Cash Credit (CC HYPO) Loan
- Registered Mortgage of Land & Building
- Hypothecation/Pledge of stock in trade.
- Personal Guarantee of the Owner(s)/ Directors.
- Corporate Guarantee of the Related Business Concern(s)
- Postdated cheque.
- Other Securities as acceptable to the Bank
Repayment Method:
Repayment may be in a lump sum from daily sales proceeds or as customers with but have to pay charged interest in each quarter and outstanding will be adjusted within the validity.
Interest Rate:
Interest is fixed and can be changed anytime during the tenor of the loan as per bank’s discretion. In CC (HYPO), ownership and possession of the goods remain with the borrower although by virtue of the hypothecation agreement the bank can take possession of the goods as well as Mortgaged property if the borrower defaults.
Important Links:
01. https://www.pubalibangla.com/Cash-Credit.asp
02. https://www.mblbd.com/home/funded
FAQs for Cash Credit (CC HYPO):
01. Is Stock remains under lock and key Bank in Cash Credit Loan?
In Cash Credit Loan Stock in Trade remains under Customers lock and key.
02. Is the Valuation of the property for mortgage for Cash Credit Loan done by the bank?
Valuation for mortgage property for Cash Credit Loan accomplish by enlisted valuation firm of the bank but the bill for valuation borne by the customer.
03. After expiration of validity what is the procedure for renewal?
Usually, Cash Credit facilities have a tenure of 12 months. For renewal, borrowers have to pay charged interest and loan outstanding must be within the sanctioned limit.