New Venture Management by Donald F. Kuratko & Jeffrey S. Hornsby

Author:Donald F. Kuratko & Jeffrey S. Hornsby
Language: eng
Format: epub
Publisher: Routledge

when the seller allows the buyer to take the merchandise immediately and pay for it later—and short-term bank loans. Short-term loans are particularly helpful when a temporary need for more capital exists, such as when retailers build up a seasonal inventory and pay for it when it is sold. For example, it is typical to find businesses that sell swimwear increasing their inventory during the late spring, while those that sell skiwear will begin building up their inventory in the early fall. Without trade credit or a short-term bank loan, the owner would have to have a large amount of capital on hand to handle peak buying periods. Most trade credit and short-term bank loans are self-liquidating; that is, the money obtained from the sale of the inventory is used to pay off the loan. Most bank-financed loans are unsecured, which means they are not backed by collateral. However, if the business does not have a good credit rating or a lot of money is involved, the bank will insist that the loan be secured by some of the business’s assets.2

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