How I Managed an ₹8 Crore Cash Credit Limit in a Rice Mill and Seed Business

Why an inventory-heavy rice mill needs working capital in the first place

Sudha Rice & Seeds is our family's rice-milling, paddy-trading, and seed-processing business. It began as my father's business, and I grew up around it — around the paddy yards, the milling floor, the seasonal rush of procurement — before later taking on direct, personal responsibility for its operations: working capital, borrowing, stock, and collections. This article is my own account of managing that side of the business, specifically the Cash Credit facility that financed it, told with the privacy limits I think any account like this should carry — no bank name, no account numbers, no customer or supplier names, no property or sanction-letter detail, and no invented drama. What follows is genuinely what I learned, not a dressed-up version of it.

A rice mill's core problem is timing. You cannot buy paddy in small amounts spread evenly across the year — a large share of the annual requirement arrives in a compressed harvest window, and if you're not there to buy it then, at the prevailing price, you don't get another chance until the next season. That means paying suppliers and farmers for a large volume of raw material well before you've milled, packaged, and sold the rice — and the same seasonal logic applies to seed procurement and processing. The gap between that outlay and the cash coming back from sales, spread over the following months, is exactly what working-capital finance exists to bridge.

The operating cycle, as I actually lived it

• Purchasing paddy or seed during the procurement window, often needing to move on volume and price quickly.
• Paying suppliers and farmers, frequently on tighter terms than we could offer our own customers downstream.
• Storage, with real carrying cost and real risk — spoilage, pest damage, and the insurance considerations covered in our companion guide on this.
• Processing — milling paddy into rice, bran, husk, and broken rice; grading and cleaning seed.
• Packaging, timed to dispatch schedules and, for seed, to the sowing-season calendar.
• Dispatch to wholesalers, distributors, and other buyers.
• Credit sales — much of our output moved on credit terms, not cash on delivery.
• Waiting for customer payment, which closes the cycle and frees up cash (and drawing power) for the next round.

Every stage in that list ties up cash for a period of time. The CC facility existed to fund the business through that whole sequence, over and over, season after season.

Why accounting profit and available cash are not the same thing

A season can look profitable on paper — good milling yield, decent rice prices, healthy byproduct income from bran and husk — and still be genuinely cash-tight, because a large share of that "profit" is sitting in unsold stock or in receivables from customers who haven't paid yet. I learned to stop reading the P&L as a cash statement. They tell you different things: the P&L tells you whether the business, as a whole, is fundamentally sound; your bank balance and your drawing power tell you whether you can pay this week's supplier bill. Both matter, and confusing one for the other is an easy way to be caught short even in a genuinely good year.

What an ₹8 crore sanctioned limit actually meant, operationally

Our Cash Credit facility was sanctioned at approximately ₹8 crore. I want to be precise about what that number did and did not mean day to day. It was the ceiling the bank had agreed to in principle, reviewed periodically and renewed, typically annually, against our financials and account conduct. It was not ₹8 crore sitting available to draw whenever we wanted — that depended on drawing power, recalculated from our monthly stock statement, and it moved with the season: highest in the weeks just after paddy procurement, when stock value was at its peak, and lower as that stock was milled, sold, and converted back into cash through the following months.

Sanctioned limit versus usable drawing power: the gap that mattered most

The gap between the sanctioned ₹8 crore and our actual, month-to-month drawing power is, in my experience, the single most important operational reality of running a facility this size. There were months where our usable drawing power sat meaningfully below the sanctioned ceiling — not because anything was wrong, but because stock had genuinely sold down and hadn't yet been replenished by the next procurement cycle. Planning cash flow around the sanctioned number instead of the actual, current drawing power is, in my view, the most common and most avoidable mistake a business in our position can make.

Daily utilisation and interest discipline

Because interest accrues on the daily outstanding balance, not on the sanctioned limit, how the account was run day to day genuinely mattered to our cost of borrowing — drawing only what was actually needed for that week's supplier payments and wage obligations, and applying customer collections against the outstanding balance promptly rather than letting cash sit idle in a current account while the CC balance stayed higher than it needed to be. This is a small, unglamorous discipline, and it is one of the few things about the facility that was entirely within our own control, every single day.

Seasonal stock peaks

The paddy-procurement season was, without question, the period of highest utilisation and highest attention every year — the largest single stock position we carried, the largest single draw on the facility, and the period where accurate, current stock statements mattered most, since that is exactly when drawing power needed to reflect a genuinely large, genuinely real stock position to support the borrowing the season required. Treating that seasonal peak as a predictable, planned-for event, rather than a surprise each year, made the whole cycle considerably easier to manage.

The role of roughly ₹2.6 crore in unsecured borrowing

Alongside the CC facility, the business also carried approximately ₹2.6 crore in unsecured borrowing. I want to describe this carefully and without dressing it up: it functioned as additional liquidity support — extra room for the business beyond what the CC facility alone provided — and it represented additional risk, not a free or lower-stakes source of funds. Unsecured borrowing still has to be serviced on its own terms, and it still counts as part of the business's overall exposure when a bank looks at total obligations, including at CC renewal time. I am not describing this as a model to copy or a benchmark for another business's own borrowing structure — every business's right mix of secured and unsecured finance depends on its own specific circumstances, and this is simply an honest account of what our own structure looked like.

What the weekly accountant did

Our accountant came in roughly once a week and handled the operating rhythm of the books: voucher entry, recording purchase and sales transactions, bank reconciliation, maintaining ledgers, reconciling stock movement against accounting records, tracking receivables and payables, keeping GST-related working records current, and preparing the underlying information needed for our periodic bank reviews and stock statements. This was steady, essential, ongoing work — the kind that, done consistently, meant our books were never far out of date and our monthly stock statement to the bank could be built on real, current numbers rather than reconstructed under deadline pressure.

What the Chartered Accountant did — a genuinely separate role

Our Chartered Accountant's role was distinct, and I want to be clear it was not the same job as the weekly accountant's, nor did the CA's involvement mean the CA guaranteed any outcome with the bank. The CA's work covered financial-statement finalisation, tax and audit-related work where applicable, review of accounting classifications and provisions, support in preparing CMA data or projections where a submission required it, and coordination during the annual renewal process — helping ensure our financial position was presented accurately and in the format the bank needed. Where certification was legally and factually applicable, that certification came from the CA in that professional capacity — never something I asked for, or received, as a guarantee of sanction, renewal, or any specific outcome. A CA's professional work supports a strong renewal case; it does not and cannot promise one.

What remained mine — the owner's responsibility, never delegated

Whatever expert support surrounded the business, certain things were never anyone's job but mine: the accuracy of our actual physical stock, the reality of our sales figures, the discipline of chasing collections rather than letting receivables drift, every decision about how much to borrow and when, how the facility was actually utilised day to day, and — underneath everything else — the accuracy of the information we gave to our accountant, our CA, and our bank. Good professional support can organise, verify, and present a business's numbers well. It cannot manufacture accuracy that was never there at the source, and it was never reasonable, in my view, to expect it to.

Stock reconciliation, bank reconciliation, GST, receivables, and payables — the discipline underneath it all

None of the above works without the unglamorous, repeated discipline of reconciliation: making sure what the godown register showed physically present matched what the accounting stock ledger showed, what our bank statement showed matched our own cash-book records, what our GST returns reported matched our actual sales and purchases, and what our receivables and payables ageing showed matched what customers and suppliers would actually confirm if asked. This is not a one-time task done for the bank's benefit at renewal time — it is a continuous discipline that, done well, makes renewal, stock audits, and even ordinary decision-making inside the business considerably easier.

Preparing for renewal

Our own renewal preparation followed the same 60-90-day rhythm described in this cluster's dedicated renewal guide: closing out the latest financial data, making sure stock and debtor/creditor statements were current and reconciled, and bringing our CA in early enough for CMA data or projections to be done properly rather than rushed. The years this went smoothly were, without exception, the years where nothing about our books, stock, or bank data needed to be reconstructed or explained under time pressure — the story was already consistent, because we had kept it that way all year.

Mistakes I watched other business owners make, and worked to avoid myself

• Treating the CC limit as profit — spending against the sanctioned ceiling as though it were the business's own money rather than a facility to be repaid.
• Using working capital for personal spending — blurring business and personal finances is a fast way to lose track of what the business can actually afford.
• Funding fixed assets permanently through CC — a mistake this cluster's comparison guide covers directly, and one I made a deliberate point of avoiding by financing equipment separately.
• Ignoring receivables — letting collections drift because sales, not collections, feel like the more exciting part of the business.
• Inflating stock on statements to support a bigger drawing power than the business genuinely had.
• Delaying books until they're needed for a bank submission, rather than keeping them current as routine practice.
• Depending on annual accounts alone, without the month-to-month stock and cash-flow visibility that actually runs a seasonal business.

What I would monitor every week, if I were starting again

Current drawing power against sanctioned limit; the age profile of outstanding receivables; whether stock statements are being prepared from real, current records rather than estimates; the daily outstanding CC balance relative to what the week's actual obligations require; and whether anything in the books, the stock, or the bank data has started to drift out of sync with each other. None of this is complicated. All of it is easy to let slip when the business is busy — which, in a seasonal operation, is most of the time.

Lessons for another rice mill, seed business, or trading operation

Know your drawing power, not just your sanctioned limit, and plan around the smaller of the two. Build your seasonal peak into your planning as an expected, recurring event, not a surprise. Keep your weekly bookkeeping and your periodic CA-level financial work as genuinely separate, well-defined roles, and never expect either to substitute for your own oversight of the business's real numbers. Treat any additional borrowing — secured or unsecured — as a deliberate decision with a clear purpose, not a convenience. And prepare for renewal as a real, recurring event that starts months in advance, not a formality that happens automatically because it happened smoothly last year.

The principle I'd want another business owner to take from this

Credit can support a good operating cycle, but it cannot replace margin, collections and financial discipline. An ₹8 crore facility, or any facility of any size, only ever bought us time and smoothed a genuine timing gap between paying for stock and collecting from customers. It never once did the work of actually running the business well — that part was always, and only ever, ours to do.

A season, roughly, from the inside

It's easier to describe the rhythm than to describe any single number. Procurement opens, and for several weeks the priority is simple: be present at the right places with the right funds ready, because paddy and seed bought late or bought hesitantly is paddy and seed bought at a worse price, if it's available to buy at all. Through that window, drawing power climbs as stock climbs, and the account runs closer to its ceiling than at any other point in the year. Once procurement tapers, the work shifts — milling, grading, processing, packaging — and so does the financial picture: stock converts from raw material into finished goods, finished goods convert into either cash sales or receivables, and drawing power comes back down as that conversion happens, month over month, until the next procurement window opens and the cycle repeats. Nothing about that rhythm is unique to us; it is the shape of nearly every seasonal, inventory-heavy business, and recognising it as a rhythm rather than a series of surprises is, in hindsight, most of what made the facility manageable.

Sources and methodology

This article is a first-person account of operating a real Cash Credit facility for Sudha Rice & Seeds, written with deliberate privacy limits — no bank name, account numbers, customer or supplier identities, property details, sanction-letter specifics, or exact daily balances are disclosed, and no dispute, default, inspection, or bank conversation is described because none of that kind occurred and none is invented here for effect. General mechanics referenced throughout (drawing power, renewal, account conduct) follow the same RBI public guidance cited across this cluster's other guides, linked below. Figures for the CC limit (approximately ₹8 crore) and unsecured borrowing (approximately ₹2.6 crore) are real, rounded business figures, presented as this business's own experience — not as a benchmark, target, or recommendation for any other business's borrowing structure. Last verified 1 August 2026.

Educational disclaimer

This article is a personal account of one business's experience with working-capital finance, for educational purposes. It is not personalised financial, lending, tax, or legal advice, does not represent any bank or lender, and should not be read as a template for how much any other business should or could borrow. Jay Sudha is a finance educator and business owner, not a banker, chartered accountant, or registered financial adviser — for guidance specific to your own business, consult your bank and a qualified professional.