What is a short-term loan for commercial organizations?

A short-term loan is a sum of money granted by the bank for a short period of time, issued on the terms of urgency, pay and repayment. As a rule, in contracts with borrowers, the period for which it is necessary to repay a loan and the interest rate are prescribed, and the conditions for lending to individuals differ from the principles of the work of banking institutions with the population. Currently, short-term bank loans aimed at financing enterprises are divided into single loans, overdrafts and loans in the form of a non-revolving or revolving credit line.

Security deposit : Private companies can get a short-term commercial loan by providing liquidity to the banking institution, whose sale in case of non-payment of money taken from the lender can cover the amount owed to the bank. As a pledge, firms can use residential or commercial real estate, motor vehicles and land, specialized equipment and equipment, money contributed to the deposit, goods in circulation.

Overdraft : The overdraft offered by bank offices is a short-term loan issued to enterprises to cover the temporary shortage of current assets in the national currency so that the company can perform current settlements. Currently, the overdraft is provided by paying payment documents over the balance of funds on the current account of the company, within the originally agreed amount. And the overdraft is repaid at the expense of all money resources arriving on the current account of the enterprise-client.

Overdraft can be obtained from commercial companies with an unblemished credit history. The meaning of this type of short-term loan is that the banking institution replenishes the amount that is insufficient to pay the client company's account if there is less money on the current accounts of the organization than is necessary for payment. Moreover, the funds of the financial institution are transferred directly to the beneficiary's current account, the name of which is indicated in the payment documentation, and not to the account of the enterprise that is the client of this bank.

Overdraft is usually repaid automatically when the funds are credited to the client account, and the terms of such a type of lending are clearly prescribed in contracts signed by the borrower and the lender. As a rule, the overdraft service is based on the trust relationship between the client company and the representative of the bank, so the borrower does not need to make out loan agreements every time the firm lacks funds.

Loans for replenishment of working capital : Firms receive short-term loans for full-fledged financing of their economic activities. Due to loans, raw materials, various materials can be purchased for the production of finished products, wholesale purchases of all kinds of goods, the purpose of which is their subsequent resale.

Credit line : Quite often a short-term loan for commercial organizations is issued by opening a credit line. In this case, money is given to the client in the form of separate tranches over a specific period of time, within the limits originally stipulated in the contract, while special additional negotiations are not required.

A non-revolving credit line is a type of lending, when within a limit set by a banking institution a commercial organization receives tranches for a specific amount prescribed in advance in the contract. In the case of opening a renewable line, the customer's enterprise receives cash tranches, and after their full repayment can receive new cash loans within the established limit and on the conditions set forth in the loan agreement.