SOURCES OF BUSINESS FINANCING

THERE ARE 3 MAIN GROUPS OF BUSINESS FINANCING-SHORT-TERM, MEDIUM-TERM AND LONG-TERM SOURCES.


SHORT-TERM SOURCES ARE FINANCING SOURCES OF UP TO 1 YEAR

MEDIUM-TERM SOURCES ARE FINANCING SOURCES OF 1 YEAR TO 7 YEARS

LONG-TERM SOURCES ARE FINANCING SOURCES OF 7 YEARS OR MORE DURATION.




SHORT-TERM FINANCING INCLUDE; BORROWING FROM FRIENDS AND RELATIVES
BORROWING FROM COOPERATIVES
OTHER SHORT-TERM FINANCING SOURCES INCLUDE ACCRUALS,TRADE CREDITS AND BANK BORROWING WHICH INCLUDE BANK OVERDRAFTS AND BANK LOANS.



TRADE CREDITS(FOR A FIRM) ARE CREATED WHEN THE FIRM PURCHASES RAW MATERIALS,SUPPLIES OR GOODS FOR A RESALE ON CREDITTERMS WITHOUT SIGNING ANY FORMAL AGREEMENT FOR THE LIABILITY. TRADE CREDITS REPRESENT AN UNSECURED FORM OF FINANCING SINCE NO SPECIFIC ASSETS ARE PLEDGED AS COLLATERAL FOR THE LIABILITY.

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