Source or Type Of Short-term Finance: Short-term loan

Features & Salient Points

• Fixed amount and have a fixed period of time to repay the loan;

• Interest rate is fixed;

• Duration from few months to few years;

• Repayments either in installments or bullet type meaning one lump sum repayment;

• Interest is charge on the amount borrowed;

• Like bank overdraft, need to provide security or collateral for the lender bank;

Advantages

The company does not need to pay back immediately especially when they embark on medium to long term projects/investments. So it is more secure than bank overdraft;

Disadvantages

    The interest rate is fixed. Un-conducive particularly when interest rates trends are moving downward;

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