Finance: Sources of Short Term Financing
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List five different sources of short-term financing. Discuss the characteristics of each source and explain why a company might choose one over the other.
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This solution provides an overview of five short-term financing options.
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Short term financing is required by the company to meet its day to day operations (ie., working capital requirements) and not for long term projects. Short term fund should be repaid by the company within one year from the date of receipt of the funds.
Sources of short term financing:
1. Advances from customers: If the company agrees to supply goods within three months from the date of order, then the company will ask for the advance money (certain percentage of the amount of sale) or sometimes it may ask for the full amount of sale to be paid in advance. This advance money can be used as short term funds and the money can be used for ...
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