Source of Short Term

Finance
BALU.J
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 assets.
Bank Overdraft
Treasury bill(T-Bill)
Trade Creditors
Customers Advances
Finance Companies
Commercial Paper
Bank Overdraft
Overdraft is a facility that bank provides to its customers in which the
customer is permitted to draw money from banks in excess of the
balance the balance in their bank accounts.
Treasury bill(T-Bill)
Short Term Government Security with maturity ranging from 4 weeks
to 52 weeks

Usually sold at auction on discount basis.

Yield is lower than on other securities.

Treasury Notes Long term 1- 10 yrs.


Trade Creditors
Trade creditors are probably the most important single source of
short term credit. Trade creditors are those business establishments
which sell good to others on credit. That is, they do not require
payment on the spot; rather they are to be paid after some days
from the date of sale.

Credit granted to manufactures and traders by the suppliers of raw
materials.

Usually for 30-90 days.
Customers Advances
Customers often finance the seller through advance payment for
the goods. The prices of the goods to be purchased are paid in
advance, i.e. before the receipt of the goods.

Commercial Banks
The commercial banks of a country generally supply funds to the
business concerns on a short-term basis, either with security or
without security if the customer is financially established. The banks,
collecting scattered savings of the people, invest a portion of the
deposits in the business for a short period of time.

Finance Companies
Finance companies usually lend money to business. They are
specialized financial institutions and their primary function is to
advance funds to the business

Commercial Paper
Commercial papers are a form of short-term borrowing facility with
maturities from seven to 364 days. Companies can thus obtain
unsecured finance directly from investors. Bypassing banks and
bond markets, although banks are often used as agents to place
the paper.

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

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.
Factors or Brokers
In one basic respect, factoring is different from other forms of
financing. In other forms funds are granted to one individual largely
on the basis of his property. Factoring is based on a different
philosophy. In considering a companys request for funds we are
more interested in the men behind the company their ability, their
hopes and aspirations for the future.

Miscellaneous Sources
There are many more sources from which can secure funds for short
period. They arefriend and relatives, public deposits, loan from
officer and the company directors and foreign exchange banks