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Short Term Sources of Finance - Coggle Diagram
Short Term Sources of Finance
Bank Overdraft
.The organisation can withdraw more money from their current account than they have in it
.Must be arranged in advance
.Has a limit
Cost and Risks
.Interest needs to be paid
.Can be cancelled at any time
Trade Creditor
.A person or business we owe money to.
Costs and risks
.Cash discounts for prompt payments will be lost
.Interest may be charged on overdue amounts
Accrued expenses
.Accured expenses means that the organisation can use certain services (expenses) for up to two months before it need to pay them
Costs and Risks
.If the bill is not paid on time the service could be disconnected
.Failure to pay bills damage the organisations credit rating
Credit card
.Credit allows the card holder to buy now and pay later
Cost and risks
.Interest is charged on the balance outstanding
Factoring debt
.Factoring allows debt to be sold for less than its value
Cost and Risks
.Very expensIve, as debts are often sold at a big discount
Invoice discounting
.A form of factoring that allows an organisation to borrow money owed to it by customers
.A debtor is someone who owes us money
Cost and Risk
.Interest is charged on the amount borrowed