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Financing is a need for every business. Firms or businesses often need to pay for their expenses, assets, equipment, pay salaries, and other important items. Financing can be either short-term financing or long-term financing. The difference between the two is of time and purpose of use.
Short-term financing and situation to seek short-term financing:
Short-term financing refers to sources of finance normally less than a year. Short-term financing is also known as working capital financing. Usually, businesses or firms seek short-term financing when they face uneven cash flow into their business, to meet the seasonal pattern of business, pay salaries, hire new staff, daily supplies, urgent need of quick cash, or purchase raw materials for the short term.
Long-term financing and situation to seek Long-term financing:
Long-term financing refers to sources of finance that exceed more than a year. Normally, the duration of long-term financing is 5,7,10, and 15 years. The sources of long-term financing are bank loans, bonds, leasing, and debt finance. Businesses or firms usually seek long-term financing when they needed to acquire new equipment, do research and development, enhance cash flow, and company expansion.
It is noted that long-term financing is more expensive than short-term financing.
You can learn more about short-term financing at https://brainly.com/question/13063794
You can learn more about long-term financing at https://brainly.com/question/2547734
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