Short-Term Financing

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SHORT-TERM FINANCING & SMEs

Seminar Paper Presented to MPSTME, NMIMS

In Partial Fulfillment of the Requirement for the Degree (MBA-Tech)

By Sameer Tayal

2012 Page | 1

Acknowledgement

I am grateful to Mr. R. C. Agarwal the mentor of the Seminar Paper for giving me the opportunity to write a Seminar Paper on the topic “Short-Term Financing & SMEs”. I thank him for his suggestions & guidance throughout the Seminar paper with full attention and dedication.

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Abstract

This paper discusses the importance & sources of short-term financing in all businesses. This paper deals not only with the spontaneous sources of finance but also how such discretion might be used. This paper examines negotiated or external sources of short-term financing consisting of money market credit & secured/ asset-based & unsecured loans. This type of financing is not spontaneous or automatic, it has to be arranged. Taking the concept of Shortterm finance as premise, this paper also highlights the short-term financing in the small & medium enterprises. It also explains the problems faced by the small and medium enterprises in acquiring short-term finance.

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Table of Contents

Title Page………………………………………………………………………………………1 Acknowledgement ..................................................................................................................... 2 Abstract ...................................................................................................................................... 3 Introduction ................................................................................................................................ 6 Statement of the Problem ....................................................................................................... 6 Purpose of the Study .............................................................................................................. 6 Significance of the Study ....................................................................................................... 6 Short Term Financing ................................................................................................................ 7 Accrued Expenses .................................................................................................................. 7 Accounts Payable/ Trade Credit ............................................................................................ 7 Open-account arrangement ................................................................................................ 8 Notes payable ..................................................................................................................... 8 Trade Acceptance............................................................................................................... 8 Term of Sale ....................................................................................................................... 8 Advantages of Trade Credit ............................................................................................. 10 Other Methods of External Short-Term Financing .............................................................. 10 Money Market Credit ....................................................................................................... 10 Unsecured Loans.............................................................................................................. 11 Secured Loans .................................................................................................................. 12 Short-term financing in Small & Medium Enterprise.............................................................. 14 Loans .................................................................................................................................... 14 Equity Issuance...
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