5. Managing Short-Term Financing
g. evaluate the choices of short-term funding available to a company and recommend a financing method.
What are three types of unsecured loans?
1. Line of credit (LOC)
2. Revolving credit agreement
3. Bankers acceptance - short term promissory trade notes
What are five types of secured loans?
1. Factoring accounts receivable
2. Inventory-backed loans
3. Floating lien - a lien against a group of assets like inventory
4. Trust receipt
5. Terminal warehouse receipt
What are two nonbank sources of loans?
1. Commercial paper - short term unsecured promissory notes issues mostly by large corporations
2. Nonbank finance companies
What is the Cost of Borrowing Rule?
Compute the total cost of borrowing and divide that by the net proceeds.