Write A 200- To 300-word Paper Comparing Long- And Short-term Financing. Describe Situations In Which Each Type Of Financing Would Be Used.?


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Long term financing is financing that is provided for a time period of more than a year. Typically long term financing is provided to businesses or individuals that are facing a shortage of capital for a project or a personal need. Short term financing usually requires that borrowed funds need to be paid back within a one year time period or less. Long term financing in relation to businesses can be used in a myriad of ways, such as: Expanding a company, purchasing machinery or materials, or buying fixed assets. The type of long term financing that is provided to a company will depend on the company type. The sources of long term financing are debt, derivatives and equity.

When determining who is eligible for short term financing, creditworthiness comes into play. There are many components of creditworthiness that are assessed when looking at an individual or business. These include: Character, capacity, circumstances, insurance, and guarantees. Typically short term financing comes in a few different forms. The primary form is credit, which is when a customer takes merchandise on credit with the agreement to pay it back with interest. Another form of short term financing is factoring, which is when funds are raised on the company's debts so that cash is received earlier

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