Short-Term Finance may be Raised by the Companies from the following Sources:-
Trade Credit
It is the credit which the firms get from its suppliers. It does not make available the funds in cash, but it facilitates the purchase of supplies without immediate payment. No interest is payable on the trade credits. The period of trade credit depends upon the nature of product, location of the customer, degree of competition in the market, financial resources of the suppliers and the eagerness of suppliers to sell his stocks.
Installment Credit
Firms may get credit from equipment suppliers. The supplier may allow the purchase of equipment with payments extended over a period of 12 months or more. Some portion of the cost price of the asset is paid at the time of delivery and the balance is paid in a number of installments. The supplier charges interest on the installment credit which is included in the amount of installment. The ownership of the equipment remains with the supplier until all the installments have been paid by the buyer.
Accounts Receivable Financing
Under it, the accounts receivable of a business concern are purchased by a financing company or money is advanced on security of accounts receivable. The finance companies usually make advances up to 60 per cent of the value of the accounts receivable pledged. The debtors of the business concern make payment to it which in turn forwards to the finance company.
Customer Advance
Manufacturers of goods may insist the customers to make a part of the payment in advance, particularly in cases of special order or big orders. The customer advance represents a part of the price of the products that have been ordered by the customer and which will be delivered at a later date.
Bank Credit
Commercial Banks play an important role in financing the short-term requirements of business concerns. They provide finance in the following ways:-
Loans:- When a bank makes an advance in lump sum, the whole of which is withdrawn to cash immediately by the borrower who undertakes to repay it in one single installment, it is called a loan. The borrower is required to pay the interest on the whole amount.
Cash credit:- It is the most popular method of financing by commercial banks. When a borrower is allowed to borrow up to a certain limit against the security of tangible assets or guarantees, it is known as secured credit but if the cash credit is not backed by any security, it is known as clean cash credit. In case of clean cash credit the borrower gives a promissory note which is signed by two or more sureties. The borrower has to pay interest only on the amount actually utilised.
Overdrafts:- Under this, the commercial bank allows its customer to overdraw his current account so that it shows the debit balance. The customer is charged interest on the account actually overdrawn and not on the limit sanctioned.
Discounting of bills:- Commercial banks finance the business concern by discounting their credit instruments like bills of exchange, promissory notes and hundies. These documents are discounted by the bank at a price lower than their face value.
Home 
