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What Are The Main Purposes Of Short Term Sources Of Funds?

February 13, 2019 By Susan Paige Leave a Comment

Are you aspiring to start an Arizona business? Congrats! The entrepreneurial journey will be an interesting one. There are points that you will be making insane sales; you might make a few losses, have payment delays and so on. It is very reasonable and a phase every normal business gets to pass from time to time. There are times that you will need funds for operations or even expansion and not have the cash at your disposal. At this point, you might have to look for other sources of finances for continuity. You have the option of choosing a long-term or short-term source.

The beauty of a short term source is that it will promptly avail the resources that you need. What does a short-term source of finance intend to do for you?

  1. Help you pay salaries

Your business will sometimes have good and bad days. You can imagine what would happen to your operation if your company did not make enough sales to help you pay for salaries and other expenses. A short-term source of finance is there to help you take care of such problems and keep your business afloat.

The good thing is that banks are aware that you might have delays with the revenues and your business needs to take care of its operations. With that, banks can arrange for an overdraft whereby you will be allowed to make withdrawals and deposits to other accounts.

  1. Allow you to pay for goods

If you are having a few problems with the finances at the moment. A short-term source of funding like trade credit will help you pay for products received. You need to note that with this type of short-term financing, the credit cycle is usually about 28 days which allows you enough time to balance your finances.  The beauty of it is that it will cost you almost nothing, that is, mostly in light of interest.

  1. Manage expenses

The other purpose of short-term sources of funds is to help you with expense management. As the business, you will be required to have a corporate credit card to be able to buy things for the business without paying for the full amount. You will, however, be required to settle the remaining payment within a specified period. Should be enough to get your finances in order, right?

  1. Settle conflict

Do you have a settlement to make with a Dui injury lawyer after your business van caused an accident? Well, if you have a few financial hurdles, you do not have to go on trial for failure to make the settlement. A bank loan will come in handy. The good thing about bank loans is that you will have a maximum of one year to pay back. Accidents do happen, and you can never predict when they will take place.

With that, short-term sources of funds like bank loans will come to the rescue and help in damage control.

  1. Hire products

You have heard about a lease. Did you know that it could be a type of short-term fund arrangement? Well, now you know. How does it work? Well, imagine a particular machine in your manufacturing plant breaks down. That will interfere with production. While replacing the machine immediately can be very expensive especially when not budgeted for, it does not mean that you have to halt your operations. You have the option of leasing the machine. The catch is that leased products usually fixed and you will not have to incur extra costs in interest.

Short term sources of funds come in handy when there is urgency for availing funds for different operations in your business.

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