8. Short-term financing

Why use short-term financing?

Cash flows from operations may not be sufficient for a firm to keep up with growth-related financing needs, or the firm may not be able to always generate enough cash flow to maintain a surplus of cash. Firms prefer to borrow now to fulfill their capital requirements through means of short-term financing or long-term financing. Both methods have their advantages and disadvantages.

Firms use a variety of short-term financing sources to support working capital. Use the descriptions in the following table to identify the short-term financing source.

Description	Short-Term Financing Source
A formal, committed line of credit extended by a bank or other lending institution
Unsecured, short-term promissory notes issued by large firms in denominations of $100,000 or more