Short term finance: businesses may need short term finance to pay its bills and to keep its suppliers happy, cash flow can be slow if sales are low or customers are late on payments - therefore the business would be likely to be short of funds to purchase raw materials, pay wages and the bills. possible sources of short term finance can include: Trade credit, Overdrafts and Debt factoring.
Medium term finance: is appropriate when funds are required for between 1 and 7 years, it is commonly used to replace some short term finance such as an overdraft that has been difficult to pay off. Medium term finance can include: Leasing, Overdrafts and Bank loans.
Long term finance: If a business is looking to purchase major fixed assets or looking to expand by purchasing land or buildings - a source of long term finance will be required. A business can raise long term finance through: Reinvested profits, Mortgages, Share or equity capital or government grants.
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