Question for bank loans

The overdraft allows the account holder to continue withdrawing money even when the account has no funds in it or has insufficient funds to cover the amount of the withdrawal. Basically, an overdraft means that the bank allows customers to borrow a set amount of money.

Cash credit is a type of short-term working capital loan extended by financial institutions, which allows the borrowers to utilise money without holding a credit balance in an account. Here, a borrower can withdraw funds up to a limit predetermined by the financial institution as per prior agreements.

A Working Capital Loan is one that is availed of to fund the day-to-day operations of a business, ranging from payment of employees' wages to covering accounts payable. Not all businesses see regular sales or revenue throughout the year, and sometimes the need for capital to keep the operations going may arise.

A term loan is a monetary loan that is repaid in regular payments over a set period of time. Term loans usually last between one and ten years, but may last as long as 30 years in some cases. A term loan usually involves an unfixed interest rate that will add additional balance to be repaid.

Sir,
example a small business wanted cc loan rs: 5 lacs from bank which sales turnover declared and estimated and project ed sales turnover and profit declared

As per the funding, the banks need projected balance sheet. This could have been outdated but I am not sure how trade credit is offered in banks now a days

1. Maximum permissible loan = 0.75* (Current assets-C. liabilities)

2. Maximum permissable loan = (0.75*C.Assets)-C. liabilities trade credit and you have to take a bank long term loan of the rest 0.25*Current assets.

3. Maximum permissible loan = `.75*(c Assets-Core current assets)-C.Liabilities. 

 

These methods could be invalid as banks have their own practices. I just now read the RBI norms and its turnover based. Making the above policies redundant because you have to fund 5% and the bank will allow upto 20-25%. It is better you make a call to the banks. They will provide much better info. 

Reserve Bank of India - Master Circulars (rbi.org.in)

Cash Credit Loan Eligibility, Interest rates, Calculator (bankbazaar.com)

 

Since your pledging, some banks can give any amount. But not sure if they need turnover or assets.