A short-term financing is a type of loan that is obtained to support a temporary personal or business capital need. As it is a type of credit, it involves a borrowed capital amount and interest that needs to be paid by a given due date, which is usually within a year from getting the loan.

Explain the two types of short-term financing. [10]

State advantages associated with the use of short-term financing. [8]

$200,000 factored brings credit terms of 60 days, 2 per cent fee charged; 6 per cent reserves and 1 per cent per month interest on advances.

Calculate the maximum loan a firm may be able to obtain. [5]

Calculate the effective cost of credit.