Short-term financing

Short-term financing

The main sources of short-term financing are (1) trade credit, (2) commercial bank loans, (3) commercial paper, a specific type of promissory note, and (4) secured loans.

Trade credit

 A company customarily buys its materials and supplies to credit from different businesses, recording the debt as an accounts payable. This transaction credit, since it's often called, is the biggest single type of short-term charge. Credit conditions are often expressed using a discount for immediate payment. Therefore, the seller may say that if payment has been made within 10 days of the bill date, a 2% reduction will be allowed. In case the cash discount isn't accepted, payment is due 30 days following the date of bill. The price of not accepting money discounts is the cost of the charge.