Short Term Financing

Short Term Financing - companies pretty easily. and...

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Name: Georgia Moore Date: 03/30/2011 Assignment: Short Term Financing Sources of short term Financing Characteristics of source Why the company might choose this one. Trade Credit This is when a company gets products on credit and has so many days to pay for them. It has a pay period of thirty to sixty days. It can also have a cash discount if paid early. Companies might choose this one because they do not need money up front in order to get their products. They also might choose this one because the supplier might have a cash discount and when the pay off the account early they get a discount on the products. Bank Credit When bank credit is granted, the borrower gets a right to draw the amount of credit at one time or in installments as and when needed. Bank credit may be granted by way of loans, cash credit, overdraft Companies might choose this because banks give loans to
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Unformatted text preview: companies pretty easily. and discounted bills. Commercial paper This is an unsecured promissory note with a fixed maturity of 1 to 270 days. This is a money-market security issued by large banks and corporations to get money to meet short term debt obligations and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note. Companies who have excellent credit are the only ones who can get this. So most companies might not choose this. Foreign Borrowing These are a loan by a foreign bank and held at a lower interest rate then domesticate banks. Companies might choose this one because of the lower interest on the loan. Collateral Loans This is when a company uses the inventory as collateral to get a loan. Companies who use this could lose their inventory if the loan is not paid back in time....
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This note was uploaded on 05/13/2011 for the course FIN 200 taught by Professor Williams during the Spring '08 term at University of Phoenix.

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Short Term Financing - companies pretty easily. and...

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