BankKeeping

  Running a business in any industry requires more than just efficient production—it demands smart financial planning, especially when it comes to working capital. Many business owners in this space turn to banks to meet short-term funding needs but often struggle to choose between different types of facilities. Should you go for a Cash Credit (CC), a Bank Overdraft (OD), or a Dropline Overdraft (DOD)? Each of these options has its own advantages and ideal use cases. In this article, we break down what each facility offers and help you decide which one best suit your business needs.   Understanding the Three Key Working Capital Options Let’s look at the various working capital loan options available to any industry business. 1. Cash Credit (CC) Cash Credit is one of the most commonly used working capital instruments in any business or industry. Under this facility, a bank sanctions a fixed credit limit that your business can use as needed. The interest is calculat...

  If your business uses working capital funding from a bank, understanding Drawing Power (DP) is crucial. DP determines how much of your sanctioned loan limit you can actually use based on your business’s current assets , such as inventory and receivables. It’s a tool used by banks to ensure that funds are used for day-to-day operations and not for long-term or non-business purposes. DP is relevant only to working capital limit facilities like Cash Credit (CC) , not for term loans or overdraft limits. Why Banks Use Drawing Power Banks don’t just release the full credit limit without conditions. They want to ensure that the business has: Genuine short-term funding needs Some stake (margin) in the operations Healthy receivables and inventory turnover Drawing Power is the mechanism used to monitor and control how much financing a business really needs at any given time. How DP is Calculated To calculate Drawing Power, banks look at ...