When an entrepreneur takes a decision to start business, the need for fund arises in order to meet the establishment costs, for purchasing fixed and current assets, for day-to-day operations, payment of salaries etc. At a later stage, funds will be required for expansion. He/she may need to take Loan(s) from Banks/ NBFCs in varied forms as stated hereunder:

·         Term Loan (TL) – This is for procurement of Fixed Assets (long term in nature) and repaid off through multiple instalments.

·         Cash Credit (CC) / Overdraft (OD) -  This is a Working Capital limit sanctioned by Lending Institutions for funding all Working Capital needs (Stock, Debtors etc.). This is renewed on an annual basis.

·         Letter of Credit (LC) / Bank Guarantee (BG) – These are non-fund based limits, in which case the Bank just issues a guarantee / comfort letter in favour of the beneficiary (instead of actually releasing the fund).