Short-term Sources Of finance

Question 1

4 Types of short-term finance

Answer 1

1. Short term loans
2. Overdrafts
3. Trade payables
4. Debt factoring.

Question 2

Short-term loans: 3 advantages and 3 disadvantages

Answer 2

Adv:
1. Finance can’t be withdrawn usually by bank
2. Private agreement between bank and business
3. Fixed rate often, so certainty of cashflow

Disadv:
1. Interest to be paid on full amount, even if not used
2. Interest often high, as usually unsecured loan
3. Loan capital to be repaid in full at the end of agreement.