“A business organization requires both long term and short term capital which can
either be on the form of ownership capital and borrowed capital.” Comment upon
the statement with hypothetical example
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Short-term loansFor most business owners, a short-term loan will be the way to go. These types of loans can provide you the funds you need fast, sometimes in as few as 24 hours.And with more alternative lending choices available now than ever before, it’s become that much easier for business owners to skip the restrictive loan requirements of traditional banks and obtain the money they need from elsewhere.Most times, small to medium size businesses don’t need long-term financing.Alternative lending options, like working capital loans, merchant cash advances or small ticket equipment leasing, offer the flexibility and quick turnaround for owners to keep their businesses running smoothly.Essentially, short-term loans are an easier way for business owners to get liquidity and overcome financial setbacks, as opposed to taking on long-term debt.Long-term loansOn the other hand, long-term loans may be necessary for some businesses. This type of financing involves multiyear repayment terms that can sometimes last for decades.It is also generally more difficult for a business owner to obtain long-term financing.Which is best?Ultimately, which type of funding option is best depends on your specific business needs. For most small business owners, a short-term loan will likely be more suitable. However, sometimes long-term financing may be necessary.Either way, it’s important to work with a lender who understands the workings of small businesses and can tailor your loan to support your success.
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The short term capitl is there to cater for the immediate and the short term arising needs for the firm to ensure that its current activies on demand are watched over while the long term capital are there to settle for the future and heavy needs needed by the firm for its social and economical well being, this is therefore needed to facilitate the running of the firm.
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