What Are the Different Types of Short-Term Financing Sources?

Short-term fund raising refers to fund raising activities to meet the temporary liquidity needs of enterprises. The short-term funds of an enterprise are generally obtained through current liabilities. Short-term financing is also called current debt financing or short-term debt financing.

Short-term funding

Short-term financing refers to the need to meet the temporary liquidity needs of enterprises

Generally speaking, the risk of short-term financing is greater than

The characteristics of short-term fundraising in terms of cost, risk, and flexibility are largely determined by the short-term actual use.

The company's short-term financing policy is to manage the sources of temporary short-term assets, permanent short-term assets and fixed assets. Generally, there are three types of financing policies that companies can choose from.

Short-term financing

The matching financing policy refers to the company's liability structure and the life cycle of the company's assets. Its characteristics are: the funds required for temporary short-term assets are raised using temporary short-term liabilities, and the funds required for permanent short-term assets and fixed assets are used to issue short-term liabilities And long-term debt and equity capital raising.

Short-term financing

The characteristics of the aggressive fund-raising policy are: temporary short-term liabilities must not only meet the needs of temporary short-term assets, but also meet the needs of some permanent short-term assets, and sometimes even all short-term assets must be supported by temporary short-term liabilities.

Short-term funding robustness

The characteristics of the robust financing policy are: temporary short-term liabilities only meet the needs of some temporary short-term assets, and other short-term assets and long-term assets are met by self-issued short-term liabilities, long-term liabilities and equity capital raising. ^[1]