Cash credit is the most favorite method of short term borrowing by the industrial and commercial concerns. The trader opens a current account with the bank/ the bank allows a business unit to borrow money up to a certain limit by pledging the goods with it. The goods are released in full or in parts on getting payments. The interest is charged on the amount of money actually withdrawn and not on the entire amount of money which is sanctioned for the loan. Cash credit is a borrowing on the comparatively long term and on regular basis. The second is discounting of bills it is one of the good source for raising the short term capital of the business.
Banks may give short term credit to its trusted customers by discounting their bills of exchange. The purchases the bill of exchange and credits the customers account with the amount of the bill less discount. The bank gets back the money on maturity of the bills. So this is one of the good methods for short term financing for the business. The next method is bill of lading. A bill of lading is a receipt issued by a shipping company for the goods to be transported from the seller to the purchaser. The purchaser can get short term loan from the bank by offering the bill of lading as security for the loan.
Banks may give short term credit to its trusted customers by discounting their bills of exchange. The purchases the bill of exchange and credits the customers account with the amount of the bill less discount. The bank gets back the money on maturity of the bills. So this is one of the good methods for short term financing for the business. The next method is bill of lading. A bill of lading is a receipt issued by a shipping company for the goods to be transported from the seller to the purchaser. The purchaser can get short term loan from the bank by offering the bill of lading as security for the loan.