Submitted By: Charwi Mishra

In our present day economy, finance is defined as the provision of money at the time when it is required. Mainly there are two types of sources of finance Long term sources of funds Short term sources of funds

Issue of shares Issue of debentures Ploughing back of profits Loans from specialized financial institutions, etc.

Bank Credit Customer Advances Trade Credit Factoring Accruals Deferred Incomes Commercial Papers Instalment Credit

Some business houses and firms depend upon commercial banks for obtaining loans to meet their working capital requirements that is known as bank credit.

TRADE CREDIT
Trade credit refers to the credit extended by the suppliers of goods in the normal course of business.

It is easy and convenient method of finance. It is flexible as the credit increases with the growth of the firm. It is informal and spontaneous source of finance.

Some business houses get advances from their customers and agents against orders.

FACTORING
A commercial bank may provide finance by discounting the bills or invoices of its customers. Thus, a firm gets immediate payment for sales made on credit.

SALES OF GOODS CUSTOMER RECEIVABLES

SELLING FIRM

FACTOR

Accrued expenses are the expenses which have been incurred but not yet due and hence not yet paid also. Examples: wages, salaries, interest and taxes.

DEFERRED INCOMES

Deferred incomes are incomes received in advance before supplying goods and services. These funds increase the liquidity of a firm.

Commercial papers represents promissory notes issued by firms to raise short-term funds. ELIGIBILITY OF A COMPANY FOR ISSUING COMMERCIAL PAPER Company listed on the stock exchange Has a net worth of atleast Rs. 10 crores Has a maximum permissible bank finance of Rs. 25 crores can issue commercial papers not exceeding 30% of its working capital limit.

This is another method by which the assets are purchased and the possession of goods is taken immediately but the payment is made in instalments over a pre-determined period of time.

There are also some other short-term sources of finance such as The Indigenious bankers, public deposits etc.

We came across various short-term sources and its uses. Lastly we can say that shortterm sources are very important for the establishment of the business and to carry out its day-to-day operations.