Page 88 - DBP5043

TYPES OF SHORT-TERM FINANCING:

B. NEGOTIATED FUNDING SOURCES:

Negotiated funding sources that are obtained from different sources
are more formal and involves specific procedures which are usually
offered by commercial banks and licensed financial institutions.

Among the most important source of negotiated funding are:

1) Bank loans (short-term loans)
2) Commercial paper
3) Factoring of Accounts Receivable
4) Lease of Accounts Receivable

Estimating the cost of short-term financing (negotiated) in general:

The estimated cost of short-term financing is based on the basic
formula below:

=

P = principal

r = rates

t = times

Interest in the RM is the amount payable to the involved parties in
return for loans or advances that have been granted.

Example 2

Mr Ali applies for a loan for 6 months amounted up to RM 45,000 at
the rate of 10%. What is the interest that is imposed on Mr Ali.