Short Term Working Capital B11-05b
Provide some advantages and disadvantages, of short-term notes payable as a form of financing.
- Advantages:
- Available to creditworthy firms; flexible; unsecured; provides cash; because its short-term, you can benefit from lower interest rates.
- Disadvantages:
- Credit rating impacts your interest rate.
- Repayment required in the short-term.
- Compensating balances increase cost, and reduces effective funds available.
- If interest rates increase, then refinancing cost will be higher.
