Running a business is exciting, but it also comes with many financial challenges. Some months, sales are excellent. Other months, customer payments get delayed while salaries, rent, supplier bills, and GST payments still need to be made on time.

This is a common situation for many businesses in Kolkata and across West Bengal.

To handle these financial needs, banks offer different types of business loans. Two of the most popular options are the Cash Credit (CC) Facility and the Term Loan.

Many business owners think these two are the same, but they are designed for completely different purposes.

If you’re planning to apply for business finance, this simple guide will help you understand the difference and choose the option that suits your business best.

What is a Cash Credit (CC) Facility?

A Cash Credit (CC) Facility is a type of working capital finance that gives your business access to funds whenever you need them.

Instead of receiving one fixed loan amount, the bank approves a credit limit. You can withdraw money as required and repay it whenever funds are available.

The biggest advantage?

You pay interest only on the amount you actually use, not on the entire approved limit.

For example, imagine you receive a large customer order. You need to buy raw materials immediately, but your customer will pay after 45 days. Instead of using your personal savings, you can use your Cash Credit facility to manage this temporary cash flow gap.

This makes CC facilities very useful for businesses that need regular working capital.

What is a Term Loan?

A Term Loan works differently.

Here, the bank gives you the entire loan amount at one time. You then repay it in fixed monthly EMIs over an agreed period.

A Term Loan is usually taken for long-term investments such as:

• Buying machinery
• Purchasing business equipment
• Expanding your office or factory
• Setting up a new unit
• Renovating commercial property
• Business expansion projects

Unlike a CC Facility, interest starts on the full loan amount from the day it is disbursed, even if you haven’t used all the money yet.

CC Facility vs Term Loan – What’s the Difference?

Feature	Cash Credit (CC)	Term Loan
Purpose	Daily business expenses	Long-term business investment
Money Received	Withdraw only when needed	Entire amount received at once
Interest	Only on amount used	On full loan amount
Repayment	Flexible	Fixed monthly EMI
Best For	Working capital	Business expansion
Flexibility	High	Moderate

When Should You Choose a Cash Credit Facility?

A Cash Credit Facility is ideal if your business often faces cash flow issues.

For example:

• Customer payments are delayed.
• You need money to purchase stock.
• Supplier payments are due before customers pay.
• Salaries need to be paid on time.
• Seasonal demand requires extra working capital.

Many traders, wholesalers, distributors, manufacturers, and MSMEs in Kolkata and West Bengal use CC Facilities because they provide flexibility without taking a large loan every time.

When is a Term Loan the Better Option?

A Term Loan is suitable when you need money for a specific long-term purpose.

For example:

• Opening a new branch
• Buying machinery
• Purchasing commercial property
• Expanding production
• Setting up a warehouse
• Investing in new business infrastructure

Since the loan is repaid through fixed EMIs, it’s easier to plan your monthly finances.

Which One Costs Less?

This is one of the most common questions business owners ask.

The answer depends on how you plan to use the money.

A Cash Credit Facility can save you money because you pay interest only on the amount you use. If you borrow ₹20 lakh but use only ₹8 lakh, interest is charged only on ₹8 lakh.

However, if you keep using almost the entire CC limit throughout the year, the interest cost can become quite high.

A Term Loan may be more economical when you need a fixed amount for a long-term investment and know exactly how much funding is required.

There is no one-size-fits-all answer. The right choice depends on your business needs.

Can a Business Use Both?

Yes, and many successful businesses do.

For example:

• A Cash Credit Facility helps manage daily expenses and working capital.
• A Term Loan is used for expansion or buying assets.

Using both wisely helps maintain healthy cash flow while supporting long-term growth.

What Do Banks Check Before Approving a Loan?

Whether you apply for a CC Facility or a Term Loan, banks look at your financial health before making a decision.

They usually review:

• Business turnover
• Profit and loss statements
• GST returns
• Income Tax Returns
• Bank statements
• Balance Sheet
• Credit score
• Existing loan repayment history
• Business experience

Even a profitable business can face rejection if financial documents are incomplete or not properly prepared.