Financing short term needs



Financing short term needs

Introduction

Short term financing sources

Every organization has certain financing needs that they arrange through using long term and short-term financing tools. Similarly, companies operating in Technological industry of USA, also require short term financing to complete its business operations. Short-term business finance enable organization operating in technological industry to participate in available short-term opportunities available in the market.

Short-term financing instrument are of extreme importance to the company in managing organization business operations (Bringham & Daves, 2012).. Organizations operating in the technological industry of USA can chose several short terms financing instrument to fulfill its short-term needs. For instance, some companies require short term funds to sustain their position in poor condition, whereas, other companies uses short term financing to purchase inventory and material that will provide them long term advantage, and, some company uses short term financing instrument to show strong cash position of their company.

However, before selecting the short-term instruments it is important for all the organization to analyze the pros and cons of these instrument, and strategies of their companies, because not every short term financing instrument might prove to be effective for the every organizations (CFA, 2006). There are wide ranges of short term financing instruments (Bank overdraft, trade credit, leasing, bank loans, and credit cards) that are used by companies operating in technological industry, however, two of the most commonly used instruments are briefly discussed

Credit card financing

Companies of technological industries like Apple Inc and others are observed of using credit cards financing tools to overcome their small expenses. Credit card financing is normally effective, but it is imperative for but it is vital to identify the actual cost of interest on their type of financing, which normally is extremely high. Credit card financing is mostly used by large organization because credit cards service is not suitable for small companies of that industry, as it does not comply with the rules and regulation set by credit card accountability, responsibility, and disclosure act of 2009 (CFA, 2011). On the other hand, these cards also issued by lender's on organization owner personal credit, and thus inability of paying of credit would have a negative impact on person credit history.

Traditional bank loans

Other than credit card, financing, various technological companies of selected industry prefer to use traditional bank loans, primarily because of shorter payment terms and shorter lines of credit policy. Meanwhile, interest rate of traditional bank loans are considerably higher than long term loans, but overall cost of these loan is extremely low in the longer period, primarily because companies are not bind to pay of interest amount for longer period (Royer et al, 2012). On the other hand, these financing sources are less expensive than long-term loans, and these sources have the tendency of providing quick revenue earning facilities to the organizations.

However, planning to get a short-term bank loan is easy, but convincing the bank to provide loan is a bid difficult as for that company has to provide ...