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Published 2018-02-12 11:43:00

Sources of Short Time Financing

Short time financing are financial aids given out by different institutions or individuals to a business or organization for a short period of time. They are usually considered to be the best when it comes to short time business financing. They short term finances usually last for approximately a year although the duration may vary from one institution to the other. There are different sources of short term loans which include:

Bank Overdraft

A bank overdraft refers to an agreement by a current bank holder with the bank whereby the bank holder is allowed to withdraw more than his available balance to his credit up but only to a certain limit. In overdraft the interests are charged on daily basis though it may be considered to be the best if the business is able to make repayments as quickly as possible.

Trade Credit

Trade credit refers to an agreement by a supplier and a business or firm whereby the firm requests the supplier to supply extra goods without receiving payments for them. Trade credit duration usually last for 28 days however the business may request for more time to pay the goods. This type of financing has no interests charged hence it is convenient for most businesses.

Lease

Leasing refers to when an organization or company pays for a product that it does not own. The company is given the product to use in return it pays a specified amount of money per month for a certain duration of time. At the end of the lease period the product gets back to the owner. Leasing may be considered cheap unlike having to purchase the same product and it also ensures that the business runs effectively since its payments are usually fixed and are not likely to change.

Credit Brokerage Companies

Credit brokerage companies are companies founded mainly to give out credit services to a businesses and organization. A good example being Cash Carrot Brand in the United Kingdom This type of company offers credit services to businesses and individuals at no charges at all. They also give out fast loans hence saving on situations.

Differed Income

Differed income refers to payments made in advance for goods and services that need to be supplied. They are funds that an organization receives for goods it is meant to supply later on. This kind of funds increases the liquidity of a business organization or firm which could be a good source of short term financing.

Instalment Credit

It refers to when goods are purchased and their possession is changed to the buying firm while payments are made in instalments over a certain period of time. Interests are usually charged or they are added to the pieces of the goods. This form of funding allows organization with difficulties in finances to gain stability.

Accrued Expenses

They are expenses that an organization has incurred but are not due and hence they have not been paid for. This is when an organization is to pay for services already delivered. Examples are salaries, wages and taxes. Salaries are usually paid after the services have been offered hence the organization is able to use the funds meant for paying wages to finance the business.

Advances

Some organization receives advances from their agents and customers. This type of finance minimizes the investment in the working capital. It can be a good source of short time financing since there are no interest incurred. Short time financing can largely be considered by many organizations and firms. This is because:

It is fast

Short term financing can be obtained in a short period of time unlike long term financing. This ensures that nothing gets out of place since it makes funds readily available. This saves businesses from collapsing due to financial crisis.

Lower interests

Short time finances have lower interests, the longer the repayment time the more the interest one has to pay. They have low interests and this is because they are repaid back in a shorter period of time. This makes it more convenient for businesses.

Improves loan scores

Short term loans are repaid within a short period of time and paying loans on time increases the chances of acquiring future loans. The lender is in a position to trust the organization or firm and can offer it more and higher loans.

It is flexible

Short time finances are flexible in that its agreements are less restrictive unlike in long term loans. Long-time loans usually have terms which constrain a firm in the future plans. Hence short term loans are repaid early enough and are not in any way attached to the future of a firm.

Warning: Late repayments can cause you serious money problems. For help, go to moneyadviceservice.org.uk