Short-term loans: what they are and how they are distinguished
By short-term financing we mean all banking operations whose contract must not exceed 18 months.
This category includes all “revocable” bank loans, ie those with an indefinite maturity for which the bank reserves the unquestionable right, even with very short notice, to request the beneficiary to return the sums paid out. Let’s see in detail how these particular types of financing are distinguished short term payday loans fresno.
The main types of short-term financing
The cash credit line is a line of credit that is simple to request and use, designed to add flexibility to your current account and face immediate payment commitments while waiting for incoming liquidity. Through the cash credit or bank credit line, the credit institution, after a careful assessment of the income profile, makes a certain amount available and in this way the bank allows the company to debit the current account for an amount equal to the established amount.
The bank castle is a contract through which the bank, after granting a credit line and a deduction of interest, advances to the customer the amount of a credit, not yet expired, that he has towards third parties. This operation is one of the so-called “dismissal of receivables” and allows the company to anticipate the natural expiry of its receivables, transforming the credit into liquidity to be used for unexpected business needs.
The Advance on invoices : it is a financing method through which the company that needs immediate liquidity, once an invoice has been issued, not yet collected, can ask the bank for an advance of the amount of the invoice issued. With the advance on invoices, the bank, following an assessment of the parties involved, enters into a contract with the opening of a credit line called “ advance invoices ”. This contract establishes the timing, the methods of collecting the credit and the interest for the payment of the service, the amount of which will be assessed by the bank, based on the quality of the credit and the situation of the company. All these types are fundamental banking tools for the survival and development of corporate life.
Short -term bank loans fall within the banking operations whose contractual maturities must not exceed eighteen months .
In any case, “revocable” bank loans, ie those granted with an indefinite maturity, should also be included in this category, but for which the bank reserves the right to request the borrower to return the sums disbursed, with very short notice times.