Managing working capital is one of the biggest challenges for MSMEs. To solve this, banks offer a powerful tool called the CC account (Cash Credit Account).
But is it truly beneficial for every business? Or is it an expensive trap if not used correctly?
In this guide, I share how a CC account works, my personal experience, plus real stories of two close friends, and whether you should go for it.
you may also like to read: Loan Against Shares: A Smart Tool — But Dangerous During Market Volatility for MSMEs
A CC Account, or Cash Credit Account, is a working capital loan where the bank sanctions a limit (say ₹10 lakh), and the business can withdraw money whenever needed, paying interest only on the amount utilized.
Example:
If your limit is ₹10,00,000 and you withdraw ₹2,00,000, interest is charged only on ₹2,00,000.
you may also like to read: How Managing Working Capital Right Becomes the Lifeline after You Start an MSME
When I started my MSME unit, I thought having a CC account was essential.
The idea of paying interest only on the used amount sounded perfect.
But over time, I realized:
It comes with charges, risks, and responsibilities.
Compared to a simple current account, a CC account involves:
If your sales and receivables are fast, CC works well.
If slow, the interest burden grows, DP reduces, and pressure increases.
For me, the experience was mixed — helpful during cash shortages, stressful during slow months.
One of my close friends also had a CC account for his business.
He used it regularly but soon realized:
Eventually, he closed the CC account completely.
Today, he tells me:
“My business runs more peacefully without a CC limit. It was costing more than it helped.”
This example shows that a CC account is not always a blessing — it depends on your business’s nature and cash cycle.
I have another friend who runs a successful partnership business.
Because of their strong turnover, the bank keeps offering them a CC limit.
But they always decline it.
Why?
He believes:
“If cash flow is strong, why pay interest unnecessarily?”
This is also true — not every business needs a CC limit even if the bank is offering it.
From my experience and from observing others:
👉 If your turnover is strong and your banking is clean, banks automatically approach you with:
Banks are eager to lend to businesses with regular inflow and high transaction volume.
So yes — good turnover = higher chances of automatic CC limit offers.
Banks calculate Drawing Power (DP) based on:
Your usable limit = DP
If stock decreases or receivables slow down, DP drops — and the bank may ask for repayment.
| Feature | CC Account | OD Loan |
|---|---|---|
| Basis | Stock & receivables | Collateral or FDs |
| Documentation | High | Moderate |
| Interest | On used amount | On used amount |
| Best for | Inventory-heavy businesses | Service or collateral-based businesses |
| Renewal | Yearly | Yearly but simpler |
If you don’t maintain stock or want fewer compliances, OD is often better.
SBI, PNB, HDFC, ICICI, Axis, Kotak, and NBFCs offer CC facilities.
Bank reviews:
Loan agreement, hypothecation deed, insurance, etc.
You can withdraw funds when needed.
A CC account is good when:
A CC account is bad when:
CC account is helpful when necessary, but expensive when unnecessary.
Do not take it just because the bank offers it — take it only if your business truly needs working capital support.
A working capital loan where you pay interest only on the amount you use.
Good for businesses with fast cash flow; bad for those with slow rotation or enough cash reserves.
CC is for stock-based operations.
OD is for collateral or service-based businesses.
Yes, if your turnover and account management are good, banks often offer pre-approved CC limits.
ITR, GST returns, financials, stock statements, KYC, bank statements, etc.
Tabrez is an MSME entrepreneur and business blogger. With hands-on experience managing a CC account and deep exposure to MSME working capital systems, he writes practical, real-world guides for new entrepreneurs.
This article is for educational purposes only and is based on personal experiences and general financial guidelines. Readers should consult their bank or financial advisor before taking any loan or credit facility.
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