Line of Credit

The term "line of credit" refers to any credit source extended to
a business or consumer by a bank or other financial institution.
A line of credit may take several forms, such as, cash credit, overdraft credit, demand loan, export packing credit, term loan, discounting or purchase of commercial bills, etc.

It is like an account that can readily be tapped into if the need arises or not touched at all and saved for emergencies. Interest is only paid on the money actually taken out.

Lines of credit are typically extended by banks and other financial institutions to credit worthy customers as a convenient means to make purchases, or to overcome liquidity problems. A liine of credit can be either secured, as in a home equity line of credit, or unsecured, as in the credit limit on an unsecured credit card.

Cash credit

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.