Describe The Sources Of Short Term Finance.


9 Answers

Haider Imtiaz Profile
Haider Imtiaz answered
Short term finance: This type of finance is required for a period of less than a year. It is required to provide working capital for the business. The working capital is needed to purchase of raw material, payment of wages, salaries and meeting day to day expanses of the business. Short term finance may be required to meet the seasonal requirements of business. It is available at low rate of interest.

Sources of short term finance:
1. Trade credit: Trade credit is a loan in the form of goods. Trade credit is given by one firm to another firm which buys goods. This credit range from 15 days to 3 months is granted on the basis of good will of the purchaser.
Trade credit is given by the seller to the buyer of goods. It is extended by the whole seller to the retailer. Such credit facility may be called a trade credit.
2. Advances from customers: some times the reputed business houses receive a part of the price or payment from the buyers before the supply of goods. The remaining amount is received on the supply of the commodity. Advances are received for the confirmation of orders.

3. Commercial banks: The major portion of short term loans and advances are provided by the commercial banks.
4. Financial institutions: Financial institutions also advance short term finance to the business. The finance corporations help the business by providing short term funds. Some financial institutions are working at provincial level under the cooperative societies act.
Anonymous Profile
Anonymous answered
Sources of Short-term Finance
There are a number of sources of short-term finance which are listed
1. Trade credit
2. Bank credit
– Loans and advances
– Cash credit
– Overdraft
– Discounting of bills
3. Customers’ advances
4. Instalment credit
5. Loans from co-operatives
Anonymous Profile
Anonymous answered
Advantages of medium term finance
Anonymous Profile
Anonymous answered
Describe different sources of finance available to the company distinguish between short term and long term sources of finance with advantages and disadvantages of both
Haider Imtiaz Profile
Haider Imtiaz answered
On the basis of terms of duration, the business finance is classified into three types a medium term of finance is that.

Medium term finance:
To finance a business for a period of more than a year but less than 10 years is called intermediate financing. Such type of finance is obtained for expansion and modernization of existing plant. It is also needed for the purchase of assets, costly raw material. It may be used to meet the cost of maintenance, repair, improvement and betterment of plant. Lastly, it can be used to repay the short term loans.

Sources of medium term finance:

1. Commercial banks: Commercial banks provide medium term finance to traders and manufacturers against security.
2. Insurance companies: The insurance companies also provide loan to manufacturers against the security of assets.
3. Industrial development bank of Pakistan: I D B P was established in 1961 to provide medium and long term finance to establish and expand industries.
4. Pakistan industrial credit and investment corporation (P I C I C): This Corporation was set up in 1957 and is one of the major sources of providing finance for medium and long term projects. It also provides finance in technical and managerial fields. It also provides loans for working capital.
Anonymous Profile
Anonymous answered
Short term loans
trade credit
commercial paper
bank overdraft
credit card

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