Choices of Short-term Funding Available to a Company

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A company has access to many short-term sources of funding. These include funding from both bank and non-bank sources.

Short-term Funding from Banks

A company can avail short-term funding from banks in the following forms:

Lines of Credit

This is the most common form of funding for working capital needs. In this case a bank extends a line of credit to a company for its working capital requirements. The bank specifies the maximum loan that the company can avail at any time. Based on its needs the company will draw funds from this line of credit upto the maximum limit allowed. The advantage with a line of credit is that the company pays interest only for the funds borrowed and for the period for which the funds are borrowed.

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