What are the different types of short -term financing?

Short -term financing is usually defined as financing that is ensured and repaid in full in one calendar year. Many businesses use this type of financing to finance new marketing projects, launch new products or improve existing facilities. If they face the need for short -term financing, the company has several options that can be viable. With this solution, the financial institution expands the credit account for the company, allowing you to limit the limit on this account at any time and as needed. Interest rates of this type of financing are often very competitive and monthly debt payments are usually minimal. For maximum flexibility, the credit line is one of the best ways to continuously create access to short -term funds.

Loans are another short -term financing solution. Loans of this type are usually a promotional amount and have repayment conditions that include a number of up to twelve months of payments. In general, miThe loan can be used for any purpose that the enterprise requires, and does not need to require promising any collateral. While interest rates are not as competitive as the rates associated with the credit line, the strategy is ideal in financing a project that is expected to return the return earlier than later.

Factoring of the Company Reachvables is another means of managing short -term financing. With this approach, the creditor expands the percentage of current outstanding receivables in the form of a preliminary loan. Payments for these receivables are accepted by the creditor and applied to the company's account. As soon as most of the pending receivables used to secure the loan have been released, the creditor will release the remaining percentage of the nominal value of the receivables to the client, maintaining about three to four percent as a payment for the service.

Another feasible strategy for short -term fInancing is a process known as sale and leasing. In this scenario, the company sells asset for cash. The new owner rents the asset back to the original owner, which continues to use the use of the asset. Although this approach to financing is feasible, it is important to examine the possible tax assessment associated with the agreement. Depending on the tax regulations that are currently valid, the tax burden may minimize the advantage in carrying out this financing strategy.