What Are the Differences Between Long-Term and Short-Term Financing?

The introduction of short-term financing bonds in the interbank bond market is a major measure for the reform and development of the financial market.

Short-term financing

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short term

There are five main ways of short-term financing, namely

Financing bonds are registered in the Central Government Bonds Co., Ltd. (hereinafter referred to as the short-term account book)

Introduction in the interbank bond market

Short-term financing is mainly used to meet the needs of funders' short-term capital use and turnover, and investors mainly use it to meet the needs of asset liquidity management.

Long-term financing is mainly used to address the expanded capital needs of funders. Investors mainly use it to meet the needs of business management.

Taking the term of financial instruments as a classification criterion, the term of financial instruments on the money market is one year or less, and the term of financial instruments on the capital market is more than one year.

Short-term financing mainly comes from the money market. The money market is full of debt transactions.

Long-term financing mainly comes from capital markets. There are both debt and property rights transactions in the capital market.

Because financial instruments have different maturities and have different effects and benefits, fundraisers pursue low cost and low risk. They must balance the costs and risks of different financing methods and types of financing to maximize their effectiveness.

Short-term financing and long-term financing are different and related. Through the bonds of financial instruments, their utility can be transformed and changed.