Short and medium term debt finance - part 2

In this lesson

1. 0:00 Three main types of short-term debt
2. 0:17 Trade credit from suppliers explained
3. 1:04 Prompt payment discounts and timing trade-offs
4. 1:23 Debt factoring with and without recourse
5. 2:53 Overdrafts: costs and flexibility
6. 3:46 Bank loans for medium-term financing
7. 5:20 Commercial paper for large businesses
8. 7:02 Revolving credit facilities and how they work

About this lesson

You'll explore three main types of short-term debt—trade credit, debt factoring, and overdrafts—then move into medium-term options including bank loans, commercial paper, and revolving credit facilities. Each has distinct advantages and costs, and understanding when to use them is essential for FM and AFM papers. The video walks you through trade credit first: delaying payments to suppliers to preserve cash, but balancing this against prompt payment discounts and the risk of damaging supplier relationships. You'll see why debt factoring—outsourcing debt collection to a third party—can be expensive and signal financial distress, and why overdrafts, though flexible, carry punitive interest rates and can be withdrawn by the bank at any time. For medium-term debt, you'll learn how bank loans offer stability and tax-deductible interest, but require asset security and may not suit large borrowing needs. Commercial paper works differently: it's unsecured and sold at a discount rather than charging interest, making it available only to top-grade borrowers like major retailers. Finally, you'll understand revolving credit facilities: a hybrid approach where you pay an upfront fee to guarantee access to funds, then only pay interest if you actually draw on the facility. By the end, you'll be able to evaluate which short and medium-term debt option fits different business scenarios—a practical skill tested across strategic and operational case studies.

Duration: 9m