Give some examples of sources of short term finacing

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Expert Solution

The main sources of short term financing are:-

1. Trade Credit:-The trade is an essential tool for financing growth. This is a type of short term fiancing in which one can purchase goods and services on credit from different type of suppliers.They provide with an option of buying immidiately and paying later.This is the most common method used for short term financing.

2.Commercial Bank Loans:-This a kind of short term financing in which loans are obtained for shorter period of time to fund for the short term expenditure.There are projects which requires short term financing which have a high liquid inflows of cash streams.

3.Commercial papers:- It is type of a money market security which is used as a tool for short term financing. Commercial paper is issued by large corporation to obtain funds to meet short term debt obligations .It is type of unsecured debt instrument which is backed only by issuing bank or company promice to pay the face amount on the maturity date specified on the note.

4.Secured Loans:- A secured loan is a type of loan in which a borrower pledges an asset against that loan. The loan is then issued based upon the value of the collateral.It is used to fund the short term credit requirements and in case of any default , the lender recoovers the loan from the asset pledged.

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