Short-Term Financing - Essay Example

They no longer need to work with a series of pr-signed drafts. They allow customers to withdraw more funds than what is the current account up to approved limits Some banks help their customers transform book debts into cash by advancing up to 80% of the credit term invoice value.

To ease the company's workload further to banks collect the cash from creditors on behalf of a customer so that cash flow can be allowed, raise additional capital easily and quickly and save administrative time. Some businesses tend to confuse which source to go for but there must be a clearly identifiable reason why a business has to source for funds before deciding on which source to go for. This can give a clear direction. There are no guarantees that the rule of determining the source of finance can purely be followed, at some stage the firm may go for long funds when really they should have gone for short and vice versa.

This can be influenced by the cost implications of going for one and not the other. If going for the short term might cost the business a lot in terms of interest, then they may opt for the long term. At one point, even the real consumer need also to be on the lookout for which form of way o raise funds depending on what is the problem one wants to address. One can not go for a long-term loan for school fees for kids because it this necessary need to take a lot of documentation to have it processed. The same considerations are equally to be viewed from the same perspective whether consumer or business.

Conclusion. There is no confusion at all between the sources which an establishment should adopt or an individual should go for. As long as one identifies the objective of the loan or finance, it is easily determinable on which one should be opted for. All the matters are the urgency with the funds are needed and the purpose for which the funds are needed.