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Source of Short Ter

Finance

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Short Term Finance

Borrowing or lending of funds for a short period of time.

Usually one year or less in duration.

Short term finance is secured for financing the current ass

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Bank Overdraft

Treasury bill(T-Bill)

Trade Creditors

Customers Advances

Finance Companies

Commercial Paper

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Bank Overdraft

Overdraft is a facility that bank provides to its customers in which th

customer is permitted to draw money from banks in excess of the

balance the balance in their bank accounts.

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Treasury bill(T-Bill)

Short Term Government Security with maturity ranging from 4 weekto 52 weeks

Usually sold at auction on discount basis.

Yield is lower than on other securities.

Treasury NotesLong term 1- 10 yrs.

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Trade Creditors

Trade creditors are probably the most important single source of

short term credit. Trade creditors are those business establishmentswhich sell good to others on credit. That is, they do not requirepayment on the spot; rather they are to be paid after some daysfrom the date of sale.

Credit granted to manufactures and traders by the suppliers of raw

materials.

Usually for 30-90 days.

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Customers Advances

Customers often finance the seller through advance payment forthe goods. The prices of the goods to be purchased are paid inadvance, i.e. before the receipt of the goods.

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Commercial Banks

The commercial banks of a country generally supply funds to thebusiness concerns on a short-term basis, either with security orwithout security if the customer is financially established. The banks,collecting scattered savings of the people, invest a portion of thedeposits in the business for a short period of time.

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Finance Companies

Finance companies usually lend money to business. They arespecialized financial institutions and their primary function is toadvance funds to the business

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Commercial Paper

Commercial papers are a form of short-term borrowing facility withmaturities from seven to 364 days. Companies can thus obtainunsecured finance directly from investors. Bypassing banks andbond markets, although banks are often used as agents to placethe paper.

There is no collateral on the debt,Commerical paper is only anoption for large companies having high level credit rating fromrecognised credit rating agency (S&P).

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Certificate of deposit (CD)

Similar to savings account

You can look but cant touch before maturity.

Higher rates of return

Money removed subject to penalty.

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Factors or Brokers

In one basic respect, factoring is different from other forms offinancing. In other forms funds are granted to one individual largelyon the basis of his property. Factoring is based on a differentphilosophy. In considering a companys request for funds we aremore interested in the men behind the company their ability, theirhopes and aspirations for the future.

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Miscellaneous Sources

There are many more sources from which can secure funds for shorperiod. They arefriend and relatives, public deposits, loan fromofficer and the company directors and foreign exchange banks