Advantages And Disadvantages Of Short-Term Financing

The short-term financing also has the advantages and disadvantages of every financial products and service have theirs. Therefore, the advantages of the short-term financing are it is needed for several reasons as for a small business, the cash flow from sales would not be enough for growth funding needs, such as increasing new production capacity and opening new stores. It surely easier for small businesses to guarantee short-term financing instead of long-term which gives management more flexibility in operating their business. Next, short-term loans can be obtained very fast than long-term financing because small businesses do not have large cash reserves and are vulnerable to sudden financial shocks such as bankruptcy that is why short-term loans receive faster than long-term. Besides, in a flexible way, the costs of short-term debt may be lower than long-term facility plus, bank files overdraft protection which bank agrees to pay a firm’s checks, electronic debits and cash withdrawals to a certain limit. Moreover, in the management ways lenders who extend short-term financing do not involve themselves in company management or in the business’s decisions about capital investment. Meanwhile, the disadvantages for short-term financing are businesses that rely on variable-rate short-term loans will immediately feel the effects of rising rates which increase borrowing costs. Next, businesses that use credit cards for their short-term needs might see their profit margins