Short-term external financing

Any company can be financed through different methods, the one that we are going to work on in this video is the financing that comes from other entities. The most common is short-term financing that asks an entity.

The first method of short-term external financing It is the overdraft in account and this type of financing is that the company can pay money even though there are no funds in the account.

Another method is credit policy, this is money that the company and the bank agree so that the company can always have said amount of credit and very quickly you can use this money whenever you want, the company will only pay interest if you use the money.

Another method is commercial credit, based on the concept of deferring the payment of that merchandise or product that the company is buying. This credit is used to better manage deferred payments or collections.

The following method of short-term external financing is the discount of effects arises from the previous point, when making a sale a payment is agreed with the supplier in X days but if I need the money now you can go to a bank and make an effect discount that is to give the bank the right to collect what is owed plus a few interests. If the company does not pay, the client must pay.

The factoring It is similar to the discount of effects, but it has some peculiarities, this method is not used by banks but by specialized companies. If the supplier does not pay I will not have to pay since the factoring company assumes the risk of non-payment.

A little further down you have the opportunity to practice what you have learned in this video of Short-term external financing with exercises and its solutions. You can also contact me.