Various sources of short-term finance Assignment

Various sources of short-term finance - Assignment Example The researcher of this essay aims to pay special attention to various kinds of short-term finance sources available to the business entities. Four of those short-term sources are discussed below. Trade credit is a conventional source of short-term finance such that the traders and manufacturers are facilitated by their suppliers to purchase the raw material on credit. The amount of credit is not provided in the form of cash rather the goods are supplied by the suppliers to the manufacturers or traders with facility to pay for those goods after a certain time period generally ranging from 30 to 90 days. Banks also provide the short term credit facility to their customers especially to the business with the availability of funds in the form cash. Normally banks offer different kinds of credit facilities including loans, overdrafts, cash credit and discounting of short-term bills. At times, when the goods are quite costly or they are to be delivered in bulk and large quantities, the cus tomers are asked by the companies to at least pay some amount in the form of advances. These advance payments are used by the companies to meet their short-term obligations. Cooperative banks are created at the district, community levels such that these banks offer credit facilities to the business entities. They offer better credit facilities as compared to the commercial banks in terms of interest rates and the repayment of the credit. ... ntional source of short-term finance such that the traders and manufacturers are facilitated by their suppliers to purchase the raw material on credit. The amount of credit is not provided in the form of cash rather the goods are supplied by the suppliers to the manufacturers or traders with facility to pay for those goods after a certain time period generally ranging from 30 to 90 days. Bank Credit Banks also provide the short term credit facility to their customers especially to the business with the availability of funds in the form cash. Normally banks offer different kinds of credit facilities including loans, overdrafts, cash credit and discounting of short-term bills. These facilities mainly differ in terms of interest rates, repayment mechanisms, credit limits, etc. Customer’s Advances At times, when the goods are quite costly or they are to be delivered in bulk and large quantities, the customers are asked by the companies to at least pay some amount in the form of ad vances. These advance payments are used by the companies to meet their short-term obligations. Generally, the customers do not feel any hesitation in providing advances to the customers when they are aware of the fact that those goods would require some time to be delivered and the goods are also not available easily elsewhere. Loans from Cooperative Banks Cooperative banks are created at the district, community levels such that these banks offer credit facilities to the business entities. They offer better credit facilities as compared to the commercial banks in terms of interest rates and the repayment of the credit. However, those business concerns are obliged to become the members of those communities in order to avail the credit facilities provided by these cooperative banks. Comparison of