ECONOMICS

Detailed explanation-1: -Borrowings from banks are an important source of finance to companies. Bank lending is still mainly short term, although medium-term lending is quite common these days.

Detailed explanation-2: -The main sources of short-term financing are (1) trade credit, (2) commercial bank loans, (3) commercial paper, a specific type of promissory note, and (4) secured loans.

Detailed explanation-3: -Debt factoring is an external, short-term source of finance for a business. With debt factoring, a business can raise cash by selling their outstanding sales invoices (receivables) to a third party (a factoring company) at a discount.

Detailed explanation-4: -Short term finance refers to financing needs for a small period normally less than a year. In businesses, it is also known as working capital financing. This type of financing is normally needed because of uneven flow of cash into the business, the seasonal pattern of business, etc.

Detailed explanation-5: -Debt financing includes bank loans; loans from family and friends; government-backed loans, such as SBA loans; lines of credit; credit cards; mortgages; and equipment loans.