Forms of Short-term Financing/Earnings Requirements

Unit 7.1-Forms of Short-term Financing

Introduction | Preparing to Borrow | Vendor Financing | Documentary Collections | Bank Check | Personal Resources | Bank Financing | Export Credit Insurance | Guarantees | Ex-Im Bank Financing | SBA | Equity Investment | Earnings Requirments | Working Capital | Collateral | Resource Management | Primary Differences | Factoring | Forfaiting | Summary | Resources | Activities | Assessment Return to International Finance Module 7: Short-term Financing

Earnings Requirements

Financial obligations are paid with cash, not profits. When cash outflow exceeds cash inflow for an extended period of time, a business cannot continue to operate. As a result, cash management is extremely important. A company must be able to meet all its debt payments, not just its loan payments as they come due. Applicants are generally required to provide a report on when their income will become cash and when their expenses must be paid. This report is usually in the form of a cash flow projection, broken down on a monthly basis, covering the first annual period after the loan is received.

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