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short term financing


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Published in: Economy & Finance, Business
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short term financing

  1. 1. SHORT TERM FINANCING <br />SUBMITTED TO<br /> Prof. Puneet Sir<br /> PRESENTED BYRaghvendra(37) Mohd. Yamin(24)<br />
  2. 2. Financing is defined as a means of obtaining the resources to purchase an item, then paying back the loan in a set time period for a set monthly, weekly, yearly.<br />What is Financing ?????????????<br />
  3. 3. Arranging of available External funds to meet the needs of a firm for a year or less time. <br />What is short term financing?????????<br />
  4. 4. <ul><li> Cash flow from operations may not be sufficient to keep up with growth-related financing needs.
  5. 5. Firms may prefer to borrow now for their inventory or other short term asset needs rather than wait until they have saved enough.
  6. 6. Firms may prefer short-term financing instead of long-term sources of financing.</li></ul>Why Do Firms Need Short-term Financing ????<br />
  7. 7. <ul><li> Trade credit
  8. 8. Accrued expenses
  9. 9. Bank financing
  10. 10. Factoring
  11. 11. Commercial paper </li></ul>Sources <br />
  12. 12. <ul><li> It is a credit that a customer gets from supplier of goods.
  13. 13. It is the spontaneous source o financing.
  14. 14. In this the buying firm don’t pay immediately.
  15. 15. Deferral of payments is a short- term financing called “Trade Credit.” </li></ul>1. Trade credit<br />
  16. 16. <ul><li> Benefits </li></ul> 1- Easy availability<br /> 2- Flexibility <br />3- Informality<br /><ul><li>Costs</li></ul>1- typically receive a discount, if you pay early <br /> 2- the cost is in the form of the lost discount, if you don’t take it.<br />Pros and Cons<br />
  17. 17. It represents the liability that a firm has to pay for those services which have been received earlier.<br /><ul><li>Accrued wages and salaries
  18. 18. Accrued taxes and interest</li></ul>2. Accrued expenses<br />
  19. 19. 3.Bank financing<br /><ul><li>Bank overdraft
  20. 20. Cash credit
  21. 21. Purchase and discounting of bills
  22. 22. Short term loan
  23. 23. Letter of credit</li></li></ul><li>It is unsecured money market instruments issued in the form of a promissory note.<br /><ul><li> It was introduced in India in 1990.
  24. 24. RBI regulates the Commercial paper.
  25. 25. Corporates, primary dealers, Indian financial institution are eligible to issue it.
  26. 26. A corporate firm can be eligible to offer a Commercial paper if it has the value of 10 crore.
  27. 27. Maturity of Cp in india is 91 to 180 days. </li></ul>4. Commercial paper <br />
  28. 28. <ul><li> It is financial transaction where a firm sells its account receivable to any third party.
  29. 29. It emphasizes on the receivable financial assets
  30. 30. It involves the purchase of financial assets
  31. 31. It involves three parties
  32. 32. Period for factoring is 90 to 150 days.</li></ul>5.Factoring<br />
  33. 33. <ul><li>In indian market you can get factoring as low as 1000.
  34. 34. Bed debts are not considered in factoring.
  35. 35. CanbankFactors Limited
  36. 36. SBI Factors and Commercial Services Pvt. Ltd
  37. 37. The Hongkong and Shanghai Banking Corporation Ltd
  38. 38. Foremost Factors Limited
  39. 39. Global Trade Finance Limited
  40. 40. Export Credit Guarantee Corporation of India Ltd
  41. 41. Citibank
  42. 42. SIDBI
  43. 43. Standard Chartered Bank</li></ul>Factoring companies in India<br />