A cash credit or overdraft limit funds the gap between paying for inputs and collecting from customers. Get the assessment method right and you draw what the business actually needs; get it wrong and you’re either starved or paying for headroom you can’t use. We size the limit by the correct method, build the CMA that justifies it, and place it with the right lender across PSU banks, private banks and NBFCs — then walk it through to disbursement. Anchored in the full corporate finance & debt syndication practice. Part of Finnova’s ₹4,250 Cr+ mobilised across 100+ corporate-finance mandates since 2011.
A cash credit (CC) limit is a revolving fund-based working-capital facility a bank sanctions against your current assets — primarily stock and book debts — on which you draw, repay and redraw, paying interest only on the daily outstanding. An overdraft (OD) is the broader category and may be secured against current assets, deposits or property. Working-capital finance funds the cash gap in your operating cycle; the limit is sized by an accepted assessment method and the actual drawing each month is capped by Drawing Power, not the sanctioned figure. See the full corporate finance & debt syndication practice, or how a CMA report drives the limit.
Finnova Advisory is an advisory firm — we size the limit, build the CMA and negotiate the terms; the lender appraises, sanctions and disburses. Rate bands are indicative (Jun 2026), never a promise; margin and pricing are set by the lender, case by case.
Working-capital finance bridges the cash you’ve tied up in stock and receivables before your customers pay you. Two fund-based limits do most of that work.
Sanctioned specifically against current assets — stock hypothecated to the bank plus book debts. Drawing Power is recalculated monthly from your stock and book-debt statements, so the limit tracks the assets it’s lent against. The default working-capital limit for manufacturers and traders.
The broader facility — it can be secured against current assets, a fixed deposit, property (LAP/OD) or run clean against the borrower’s standing. Same revolving, interest-on-outstanding mechanics as CC, but not necessarily tied to stock-and-debtor Drawing Power.
Both are fund-based limits — they advance cash. They commonly sit on the same sanction as non-fund-based limits for a letter of credit and bank guarantee, often with interchangeability, so your purchasing (LC), bidding (BG) and cash drawings are structured as one working-capital package rather than competing for the same headroom.
There is no single formula — the lender applies the method that fits your size and sector. Pick the wrong one and the limit comes out too small or too richly margined.
| Method | How the limit is set | Borrower margin | Best fit |
|---|---|---|---|
| MethodNayak / Turnover Method | Basis20% of projected annual turnover | MarginBorrower brings 5% of turnover as margin | Best fitSmaller limits (indicatively up to ~₹5 Cr; ₹7.5 Cr for MSME) — simple, turnover-driven. |
| MethodTandon Method I | BasisBank funds 75% of the working-capital gap | MarginBorrower funds 25% of the gap | Best fitMid-sized limits where current assets and current liabilities are assessed in detail. |
| MethodTandon Method II | BasisBorrower funds 25% of total current assets | MarginDrives a current ratio of ~1.33:1 | Best fitLarger limits demanding a stronger liquidity cushion (the classic MPBF norm). |
| MethodCash-Budget Method | BasisLimit sized to peak monthly cash deficit | MarginCase-specific per the cash-flow projection | Best fitSeasonal, construction or project businesses with lumpy, uneven cash cycles. |
The Tandon methods build to MPBF (Maximum Permissible Bank Finance) — the ceiling on bank working-capital finance once the borrower’s own contribution is netted off. Method II is the stricter, ~1.33:1 current-ratio norm. For the full mechanics, read MPBF: Tandon Method I vs II and how a CMA report sizes your limit.
You can draw only up to the lower of the two. The sanctioned limit is fixed at approval; Drawing Power moves every month with your stock and receivables.
Each month you submit a stock-and-book-debt statement. The bank applies its margins (haircuts) to eligible stock and receivables, subtracts sundry creditors, and arrives at Drawing Power. If DP falls below the sanctioned limit, your available drawing falls with it — a strong limit on paper means nothing if your current assets thin out.
Full worked example: Drawing Power calculation explained.
A Credit Monitoring Arrangement report is the standard data pack every bank uses to appraise a working-capital limit. Build it well and the limit follows the numbers; build it loosely and it gets cut.
Audited prior years, current-year provisional and projected P&L and balance sheet — the basis on which projected turnover and current assets are tested.
The fund-flow statement and ratio analysis — current ratio, turnover ratios, DSCR — that show whether the limit is supported by real liquidity, not optimism.
The working-capital assessment itself — the chosen method applied to your numbers to arrive at the permissible bank finance and the margin you must bring.
How stock and receivables grow with turnover — a build-up the bank won’t fund must be defensible against your working-capital cycle, not just asserted.
A CMA is only as strong as the operating cycle behind it. Tightening that cycle is the cheapest way to shrink the limit you need — see how to calculate and shorten your working-capital cycle, and how banks appraise a loan proposal.
Where you place a working-capital limit changes the rate, the appetite for your current-asset quality and the speed of sanction. Indicative bands, dated Jun 2026 — never a promise.
| Lender | Indicative rate | Tenor / renewal | Typical sanction time | Where it fits |
|---|---|---|---|---|
| LenderPSU banks | Rate~8.5–11% | TenorCC annual, renewable | Speed6–10 weeks | FitFinest pricing on a clean, well-rated file; deepest WC limits; process is document-heavy. |
| LenderPrivate banks | Rate~9–12% | TenorCC annual, renewable | Speed3–5 weeks | FitFaster sanction and relationship-led structuring; sharper on current-asset quality. |
| LenderNBFCs | Rate~10–14% | TenorUp to ~7y (term); WC lines | Speed2–4 weeks | FitFlexible on collateral and cycles where banks hesitate; priced for the speed and flexibility. |
Corporate working-capital limits are largely priced off MCLR (SBI MCLR ~7.9–8.85%, indicative Jun 2026); EBLR / repo-linked pricing (repo 5.25%) is mandatory only for retail and MSE/MSME floating loans, not corporates generally. For the full comparison read PSU bank vs NBFC vs AIF debt.
The steps are standard; where we add value is sizing the limit by the right method, building a CMA the lender can’t cut, and negotiating the rate, margin and security.
We pick the correct method — Nayak/turnover, Tandon I or II, or cash-budget — for your size and sector, and size the working-capital gap your operating cycle actually carries.
We prepare the CMA — past and projected financials, fund-flow, ratios and the MPBF working-out — so the limit is justified by the numbers, not asserted.
We place the file with the PSU bank, private bank or NBFC that fits on rate, current-asset appetite and speed — and structure the fund (CC/OD) and non-fund (LC/BG) limits as one package.
We answer the lender’s queries against the 5 Cs, negotiate limit, margin and rate, then drive documentation so the limit goes live — and walk you through to the first drawing.
A bank sells you its product; we sit on your side — choosing the method, building the CMA, placing the file with the right lender, and walking it through to disbursement.
Nayak, Tandon I or II, or cash-budget — chosen on your size and sector so the limit is neither starved nor over-margined.
Projections, fund-flow and the MPBF working-out built to survive appraisal — the difference between the limit you ask for and the one you get.
PSU bank, private bank or NBFC, chosen on rate, current-asset appetite and speed — never on who pays us.
Ex-banker + CA depth on every file, from sizing the gap to the first drawing — and the fund plus non-fund limits structured together.
Tell us your turnover, sector and current limits, and we’ll tell you the method we’d use, the limit it supports, the likely rate band, and which lender fits. No mass application — a straight read from people who structure these every week and walk them through to disbursement.
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