Short term Financing

Short term Financing

Short term financing is the debt that matures in one year or less and used to fulfill seasonal and current assets needs.


Types/Sources/Instruments of short term financing
Short term finance can be collected from different sources. Those are given below-

Short Term Financing ↓
↓ 1.   Spontaneous Financing	↓ Money Market	↓ Bank Loan
Trade Credit i.     Open Account ii.   Notes Payable iii. Trade Acceptance Advance Payment Accrued Expenses	a. Commercial Paper b. Bankers Acceptance	a.    Unsecured Bank Loan i.   Transaction Credit ii. Line of Credit iii.    Revolving Credit iv.    Compensating Balance b.   Secured Bank Loan i.     Accounts Receivable ii.   Inventories

Spontaneous Financing
Spontaneous Financing is the automatic sources of short term fund arising in the normal course of business operations.

Business Finance Sources

Sources of Business Finance

There are two types of source of business finance

               A. Sources of internal finance
              B. Source of External finance

Sources of internal finance

i.    Promoters initial capital
ii.    Retained earnings
iii.    Dividend equalization fund
iv.    Pension fund
v.    Provident fund     
vi.    Compensation fund
vii.    Welfare fund
viii.    Provision for tax
ix.    Provision for depreciation
x.    Over use of assets



Source of External finance
          External Source Two types
   

               

               A. Institutional Sources   
               B. Non-Institutional Sources

Institutional Sources   
i.   Commercial Bank
ii.  Investment Bank
iii. Development Bank
iv.  Insurance company
v.   Financial institution
vi.  Leasing company
vii. Money market
viii.Capital market   

Other post
Finance Definition
Classification-of-Finance

Non-Institutional Sources
i.      Trade credit
ii.     Accrued expenses
iii.    Advance
iv.    Commercial paper
v.     Inventory mortgage
vi.    Mortgage of assets
vii.   Relatives and friends
viii.  Money lenders