Obtaining short-term financing

Another important aspect of short-term financial management is obtaining short-term financing. You remember the case of Toys"R"Us with the variable seasonal cash flow pattern, low cash in October after a big inventory buildup and then a large cash balance in January after the holiday season sales and cash collections? Because of this seasonal up and down fluctuation in cash, sometimes Toys"R"Us needs to borrow money in the short term. Well, there are several ways to obtain these short-term loans. One way is just a straightforward short-term bank loan. Go to the bank, ask for a loan, and promise the bank that you'll repay the loan in a couple of months. The best way to get this type of short-term loan is to provide the bank with a carefully constructed, short-term cash budget. The cash budget should show the need for the money, but also the existence of subsequent surplus cash with which to repay the loan. Now, another way to obtain short-term financing is to arrange all of this in…