Short term financing is riskier than long term

Short-term financing is riskier than long-term financing since, during periods of
tight credit, the firm may not be able to rollover (renew) its debt. This is especially
true if the funds are used to finance long-term assets rather than short-term assets

One of the advantages of short-term debt financing is that firms can obtain short-
term credit more quickly than long-term credit.
Funds from short-term loans can generally be obtained faster than from long-term
loans for two reasons: (1) when lenders consider long-term loans they must make a
more thorough evaluation of the borrower's financial health, and (2) long-term loan
agreements are more complex.
An informal line of credit and a revolving credit agreement are similar except that
the line of credit creates a legal obligation for the bank and thus is a more reliable
source of funds for the borrower
The maturity of most bank loans is short term. Bank loans to businesses are
frequently made as 90-day notes which are often rolled over, or renewed, rather
than repaid when they mature. However, if the borrower's financial situation
deteriorates, then the bank may refuse to roll over the loan.
Loans from commercial banks generally appear on balance sheets as notes
payable. A bank's importance is actually greater than it appears from the dollar
amounts shown on balance sheets because banks provide nonspontaneous funds to
firms.
A promissory note is the document signed when a bank loan is executed, and it
specifies financial aspects of the loan.
A line of credit can be either a formal or an informal agreement between a
borrower and a bank regarding the maximum amount of credit the bank will
extend to the borrower during some future period, assuming the borrower
maintains its financial strength.
If a firm has set up a revolving credit agreement with a bank, the risk to the firm of
being unable to obtain funds when needed is lower than if it had an informal line of
credit.