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Short Term Finance

Short term loans (caveat loans) are typically 1 – 12 months in duration and are normally secured against property, however business assets and other valuable assets such as cars, boats and jewelry can also be considered as security.

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Short Term Finance

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  1. Short Term Finance

  2. What is Financing Financing is defined as a mweans of obtaining the resources to purchase an item , then paying back the loan in a set time period for a set monthly, weekly, yearly.

  3. What is Short Term Financing • Short Term Loans are specifically designed to help facilitate urgent settlements. • Firms may prefer to borrow now for their inventory or other short term asset needs rather than wait until they have saved enough. • Firms may prefer short term financing instead of long term sources of financing.

  4. Why do firms need Short Term Finance • Cash Flow from operations may not be sufficient to keep up with growth related financing needs. • Firms may prefer to borrow now for their inventory or other short term asset needs rather than wait until they have saved enough.

  5. Sources • Trade Credit • Accrued Expenses • Bank Financing • Factoring • Commercial Paper

  6. Pros and Cons • Easy Availability • Flexible • Informality Costs: • Typically receive a discounts , if you pay early. • The cost is in the form of Lost discounts, if you don’t take it.

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