A cash credit is a short-term cash loan to a company. A bank provides this type of funding, but only after the required security is given to secure the loan. Once a security for repayment has been given, the business that receives the loan can continuously draw from the bank up to a certain specified amount. cash credit accounts to businesses to finance their "working capital" requirements (requirements to buy raw materials or "current assets", as opposed to machinery or buildings, which would be called "fixed assets"). The cash credit account is similar to current accounts as it is a running account (i.e., payable on demand) with cheque book facility. But unlike ordinary current accounts, which are supposed to be overdrawn only occasionally, the cash credit account is supposed to be overdrawn almost continuously. The extent of overdrawing is limited to the cash credit limit that the bank sanctioned. This sanction is based on an assessment of the maximum working capital requirement of the organization minus the margin. The organization finances the margin amount from its own funds.
Generally, a cash credit account is secured by a charge on the current assets (inventory) and debtors of the organization. The kind of charge created can be either pledge or hypothecation.
 
Overdraft facility is a credit given to an individual/ business against his or her assets as collateral with banks. As collateral, you can offer following assets to banks: house, insurance policies, bank fixed deposits, shares and bonds,  etc.
 
Difference between Overdraft Facility and Cash Credit Facility:-

• Banks create the charge on current assets on the company namely debtors and stock in case of Cash Credit facility and client has to submit monthly Stock Statements basis which Drawing Power is derived. The client cannot use more funds than the actual Drawing Power Limit even though the Sanction Limit is more. Banks generally  insist on giving Cash Credit Facility instead of Overdraft Facility for facilities more than INR 2 cr since it helps banks in knowing the short term positions  of the company( Stock and Debtors) on every month.
• ​Banks offer Overdraft facility generally to companies who are in the service sector and manufacturing companies where the exposure limit is lesser than INR 2 cr.  In case of Overdraft Facility, bank does not create a charge on the current assets of the company and company does not have to submit stock statement every month. Thus the Sanction Limit would be the same as the Usable Limit every month.