An MSME OD/CC refers to an Overdraft (OD) or Cash Credit (CC) facility tailored specifically for Micro, Small, and Medium Enterprises (MSMEs). These facilities are designed to meet the short-term working capital needs of MSMEs, enabling them to manage cash flow, purchase inventory, or handle day-to-day operational expenses.
o An OD facility allows MSMEs to withdraw funds beyond the balance in their current account, up to a sanctioned limit.
o It is a revolving facility, meaning funds can be withdrawn and repaid multiple times within the limit.
o A CC facility provides working capital loans secured against hypothecation of assets like stock, inventory, or receivables.
o Funds are disbursed up to a sanctioned limit based on the working capital requirements of the business.
• Managing short-term liquidity.
• Purchasing raw materials or stock.
• Meeting operational costs like salaries, utilities, and rent.
• Handling unforeseen expenses or delays in receivables.
o Borrow as needed within the limit and repay flexibly.
o Interest is charged only on the utilized amount.
o Ensures smooth cash flow during business operations.
o Covers gaps between receivables and payables.
o Many lenders offer secured facilities (against property, inventory, etc.) and unsecured options (based on creditworthiness).
4. Government Support:
o MSMEs often enjoy priority lending under government schemes, with subsidies or lower interest rates.
5. Easy Renewal:
o Limits are reviewed and renewed annually, based on business performance.
Feature Overdraft (OD) Cash Credit (CC)
Purpose General financial needs Working capital for business operations
Collateral May require fixed assets Secured by inventory/receivables
Interest Charged On the utilized overdraft amount On the utilized credit amount
Usage Restrictions No restrictions Limited to business expenses
• MSME Registration: Proof of MSME status (Udyam Registration or similar certification).
• Business Vintage: Typically, 2-3 years of operations.
• Financial Health: Steady turnover and profitability.
• Creditworthiness: Good credit score and repayment history.
• Collateral: Required for secured loans (property, stock, receivables, etc.).
• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): Offers unsecured loans with government-backed guarantees.
• Mudra Loans: Provides working capital loans under the Pradhan Mantri Mudra Yojana (PMMY).
• Interest Subsidy: Government schemes may offer interest rate subsidies for MSME loans.
1. MSME registration certificate (e.g., Udyam Registration).
2. Financial statements (balance sheet, profit and loss statement).
3. Bank statements (last 6-12 months).
4. Proof of collateral (if applicable).
5. Business continuity proof (licenses, incorporation documents).
Yes
funds can be used for various operational needs