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SHORT TERM FINANCING

Introduction

Financing resource can be classified into short term and long term
financing. When a company is considering deciding on a financing, three
are 3 factor:
Credit effective cost when using a financing resource

Availability of the financing resource at required amount and time
The span of time a financing is needed.

Short-term financing is the decision analysis that affect current assets
and current liabilities. It can be defined as all sources of financing that
must be repaid within a year or less.

Short term financing can be split into:

1. Financing with no collateral

•Financing service which generally is chartered by bank and other
amenities without imposing collateral

•Loan approval is based on the personal assurance and guarantee from
the mortgagor.

•Ex : commerce paper, accrued and trade credit

2. Financing with collateral

•Service financing involves certain assets which is mortgaged to get loan

•If a mortgagor fails to accomplish the term agreed and meet the pay, the
mortgagee will have the right to claim for the first mortgaged assets as
agreed in the contract.

•Commerce banks, finance companies and factoriser companies will
normally be offering this sort of loan to their customers

•The main resources of collateral are account receivable and inventory