TYPES OF BORROWERS

&
CREDIT FACILITIES
CM-UNIT-1.c.2
TYPE OF CREDIT FACILITIES
 TYPE OF CREDIT FACILITIES
• CASH CREDIT SYSTEM
• Limit, security, Drawing Power, outstanding
advance, running account, interest charged
• Like C/A, Debit balance vs. credit balance.
• Limit as per production, sales inventory
levels.
• Repayable on demand, 12 months, roll over
based o review/renewal, cash to the extent
of credit limit
• Clean C/C also possible
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SHARDA UNIVERSITY
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 TYPE OF CREDIT FACILITIES
• ADVANTAGES OF C/C
• Flexibility of utilization,
• Operative convenience.
• WEAKNESS OF C/C
• Yearly limits, possibility of diversion
• Lack of proper management

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 TYPE OF CREDIT FACILITIES
• OVERDRAFT
• Overdrawing in C/A – temporary or for longer
period, against salary
• Collateral taken in general, against FD,
shares, LIC policy,
• Written application, promissory note

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 TYPE OF CREDIT FACILITIES
• LOAN SYSTEM
• For purchasing definite assets, fixed period,
one transaction, instalment
• ADVANTAGE
• Financial discipline, end use, no diversion
• Review easier, banks have better funds
mgmt.
• WEAKNESS
• For every transaction separate loan, no
further debit allowed.
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 TYPE OF CREDIT FACILITIES
• TYPES OF LOANS
• Short term loans < 3 yrs.
• Medium term loan > 3 yrs. </= 5 yrs.
• Long term loans > 5 yrs.
• Bridge loans
• Composite loans-both capital & wc assets,
small borrowers under msme.
• Retail loans
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 TYPES OF LOANS
• PURCHASE OF BILLS- post sales finance
• Demand/sight bills, with or without recourse.
• DISCOUNTING OF BILLS
• Usance bills-seller gets money against sales,
immediately from bank-S gets money from
SB.
• DRAWEE BILL SCHEME
• Bill acceptance-after acceptance of BB, S gets
money from SB-No risk
• Bill discounting system-agreement between
S, B & BB-BB will discount & pay off S.
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SHARDA UNIVERSITY
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 THANK YOU
GOD BLESS US

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