Short-Term represents mutually provision of loans to various

Short-Term Financing

The companies of all types
and the sizes resort to short-term financing. The short-term debt is borrowed
funds which are subject to return within a year, used for financing of current
costs.

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Sources of short-term
financing of the international firm are
subdivided into two primary groups:

 

·      
Internal sources
of financing;

 

·      
External sources
of financing.

 

Kinds of internal financing are self-financing and the
intra-corporate credits. Generally, internal sources of financing of the firm are the retained earnings and depreciation
redistributed in the firm by means of
intra-corporate international loans. Serve as external sources of financing of
firm or its division bank financing (national, foreign and Euro currency) and receipt of means by means of
the security market.

 

1.    Intra-corporate short-term financing

 

Intra-corporate short-term
financing represents mutually provision of loans to various divisions of the
company and also loan granting by mother firm to the subsidiary companies and
vice versa.

 

Such loans are granted in a
type:

 

§  Direct
international corporate credit;

 

§  Back-to-back
intra-corporate loan;

 

§  Parallel
intra-corporate loan.

 

The benefit of this scheme
of financing consists in the exclusive
simplicity of its registration. However,
this method isn’t widespread in the international practice.

If intra-corporate financing
is impossible or too expensive, the firm can resort to:

 

2.    External short-term financing.

 

§  Temporary
(spontaneous) sources of financing

 

The trade credit belongs to
sources of spontaneous financing of the firm.
Its origin is connected with the transactions made by the firm. So, when purchasing other firms of goods,
raw materials, accessories on credit at the considered firm have a debt which
is considered in the form of accounts
payable (trade credit). The longer the accounts payable period and is more than
a sales amount of purchases, the additional financing for the firm is more considerable.

Trade credit (accounts for
payment) — a money which the company shall return to suppliers.

 The trade credit is the simplest and often the
least expensive form of financing of inventory stocks.