Check Point: Short Term Financing

There are four sources of short term financing with six sub divisions. Bank loan, Commercial paper, Collateralized loans, and Sale of receivables and inventory.

Bank loans are the best for short term financing mainly because the bank is a secure institute and government funded, the companies money will always be safe. Interest rates will be lower for a short term loans then they are for long.

Commercial paper is a short term, unsecured promissory note issued to the public. The overall amount of commercial paper outstanding reflects the willingness of qualified companies to borrow at the lowest rate available.

Collateralized loans are unsecured loans that require company collateral or personnel collateral to back the loan for the safety of the lender in order for a company or person to obtain a loan. If a loan borrower losses out on returned payment then the bank can obtain the repayment of the loan through the collateral the borrower has put up.

Sale of receivables and inventory is used in order to obtain a loan through the banks, a company must have a sufficient quantity of receivables and inventory in order for a bank to give them a short term loan at a reasonable interest rate.

When it comes to the best short term loan a bank loan may be best, the company will not lose out on anything other than credit score. They don’t have to put up assets, or even there company on the line for the loan and the interest rate will be the lowest it can possible be. And the loan is secured when it comes to the interest rate. All the others loans may fluctuate when it comes to interest in order for the bank to make up for losses.