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Short Term Financing: Submitted To

This document discusses short term financing sources for firms. It defines short term financing as arranging external funds to meet a firm's needs for one year or less. Common sources of short term financing include trade credit, accrued expenses, bank financing like overdrafts and loans, commercial paper, and factoring. Trade credit is when suppliers provide credit to customers who defer payments. Accrued expenses are liabilities for services already received. Bank financing includes loans and credit lines. Commercial paper is a short term unsecured debt instrument, and factoring involves selling accounts receivable to a third party.

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Kadambari Jain
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44 views13 pages

Short Term Financing: Submitted To

This document discusses short term financing sources for firms. It defines short term financing as arranging external funds to meet a firm's needs for one year or less. Common sources of short term financing include trade credit, accrued expenses, bank financing like overdrafts and loans, commercial paper, and factoring. Trade credit is when suppliers provide credit to customers who defer payments. Accrued expenses are liabilities for services already received. Bank financing includes loans and credit lines. Commercial paper is a short term unsecured debt instrument, and factoring involves selling accounts receivable to a third party.

Uploaded by

Kadambari Jain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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SHORT TERM

FINANCING

SUBMITTED TO PRESENTED BY
Prof.
Puneet Sir Raghvendra(37)
Mohd. Yamin(24)
What is Financing ?????????????

Financing is defined as a means of


obtaining the resources to
purchase an item, then paying back
the loan in a set time period for a set
monthly, weekly, yearly.
What is short term financing?????????

Arranging of available External


funds to meet the needs of a
firm for a year or less time.
Why Do Firms Need Short-term
Financing ????

Cash flow from operations may not be


sufficient to keep up with growth-related
financing needs.
Firms may prefer to borrow now for their
inventory or other short term asset needs
rather than wait until they have saved enough.
Firms may prefer short-term financing instead
of long-term sources of financing.
Sources
Trade credit
Accrued expenses
Bank financing
Factoring
Commercial paper
1. Trade credit

It is a credit that a customer gets from


supplier of goods.
It is the spontaneous source o financing.

In this the buying firm dont pay immediately.

Deferral of payments is a short- term


financing called Trade Credit.
Pros and Cons
Benefits
1- Easy availability
2- Flexibility
3- Informality
Costs
1- typically receive a discount, if you
pay early
2- the cost is in the form of the lost
discount, if you dont take it.
2. Accrued expenses

It represents the liability that a firm has


to pay for those services which have
been received earlier.

Accrued wages and salaries


Accrued taxes and interest
3.Bank financing

Bank overdraft
Cash credit
Purchase and discounting of bills
Short term loan
Letter of credit
4. Commercial paper
It is unsecured money market instruments issued in
the form of a promissory note.
It was introduced in India in 1990.
RBI regulates the Commercial paper.
Corporates, primary dealers, Indian financial
institution are eligible to issue it.
A corporate firm can be eligible to offer a
Commercial paper if it has the value of 10 crore.
Maturity of Cp in india is 91 to 180 days.
5.Factoring

It is financial transaction where a firm sells


its account receivable to any third party.

It emphasizes on the receivable financial


assets
It involves the purchase of financial assets
It involves three parties
Period for factoring is 90 to 150 days.
Inindian market you can get factoring as low as
1000.
Bed debts are not considered in factoring.

Factoring companies in India

Canbank Factors Limited


SBI Factors and Commercial Services Pvt. Ltd
The Hongkong and Shanghai Banking Corporation Ltd
Foremost Factors Limited
Global Trade Finance Limited
Export Credit Guarantee Corporation of India Ltd
Citibank
SIDBI
Standard Chartered Bank

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