What Is Short-Term Debt Financing?

Short-term debt financing is also called current debt financing , short-term debt financing, or short-term capital . It refers to financing activities in which the company's repayment period is within one year or within an operating cycle in order to meet the temporary liquidity turnover requirements. From the financial point of view, it has the characteristics of fast speed, strong flexibility, low cost, and high risk.

Short-term debt financing

Short-term debt financing

There are many ways to finance short-term debt.

The repayment period is short, so the risk is small.

Short-term financing is usually less than long-term financing.

There is often a close cooperative relationship between borrowers and lenders.

In most cases, collateral is not required for short-term financing. If the amount is large, the other party's credit history is poor, or payment may be problematic, the borrower will be required to provide collateral. Unsecured short-term financing methods include trade credit, vendor guarantees, and commercial paper.