How do you arrive the cash credit limit?

The cash credit limit is determined by assessing a borrower's creditworthiness, which includes analyzing their financial statements, cash flow, and repayment history. Lenders typically consider factors such as the business’s operational cycle, inventory levels, and overall risk profile. Additionally, the limit may be influenced by the collateral provided and the lender's policies. Ultimately, the goal is to establish a limit that meets the borrower’s financing needs while managing the lender's risk.