Short-Term Funding. An Effective Device to Aid Business Profitability

The purpose of this write up is the discussion of how short-term funding can be used to aid business profitability. In order to achieve this objective, various sources of short term funding will be evaluated with a view to underscore the relative advantages and disadvantages. I will also recommend factors to consider before using short term funding.

The key purpose of any business venture is return. This can come in various forms such as profit maximization; maximization of contribution, shareholders wealth maximisation among others. These strategic objectives usually come in sizes depending on the nature of the business or organisation.

Lofty as strategic decisions may be, the importance of having adequate and efficient funding to support it cannot be over-emphasised. It has been shown again and again that one of the main reasons why business fails is the miss-matched of funding. Experience has shown that when you use your working capital (a form of short-term fund) to finance a capital project, the ability to run the business as a going –concern into a foreseeable future becomes shaky due to cash-flow problems.

Funding a business that requires a short-term funding with a long-term financing is a sure way to exist the market arena in an unceremoniously. It is therefore critical to have a right mix of fiancé to boost productivity and enhance competitive advantage.