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Unsecured and Secured Short Term Sources

Unsecured and Secured Short Term Sources
Unsecured and Secured Short Term Sources Unsecured Non-Bank Short Term Sources Commercial Paper: Short-term, unsecured promissory notes, generally issued by large corporations, with maturities of a few days to 270 days. Usually issued in multiples of $100,000 or more. Commercial paper market is composed of the (1) dealer and (2) direct-placement markets. Advantage:  Cheaper than a short-term business loan from a commercial bank. Dealers require a line of credit to ensure that the commercial paper is paid off. Private Loans: A short term unsecured loan may be taken from a wealthy shareholder, a major supplier, or other parties interested in assisting the firm through a short term difficulty. Cash Advances for Customers: A customer may pay for all or a portion of future purchases before receiving the goods. This aids the firm to purchase raw materials and produce the final goods. This form of financing is a special arrangement for expensive or custom-made items that would strain the financial resources of the manufacturing company. Secured Short-term Sources: Security (collateral) — Asset (s) is pledged by a borrower to ensure repayment of a loan.  If the borrower defaults, the lender may sell the security to pay off the loan. Collateral value depends on: Marketability Life Riskiness Types of Inventory Backed Loans: Field Warehouse Receipt — A receipt for goods segregated and stored on the borrower’s premises (but under the control of an independent warehousing company) that a lender holds as collateral for a loan. Terminal Warehouse Receipt — A receipt for the deposit of goods in a public warehouse that a lender holds as collateral for a loan. Trust Receipt – This loan is secured by specific and easily identified collateral that remains in the control or physical possession of the borrower. A security device acknowledging that the borrower holds specifically identified inventory and proceeds from its sale in trust for the lender. Example: When automobile dealers use this kind of financing for the cars in their showrooms or in stock, it is called floor planning. As implied by the name, this kind of loan requires a considerable degree of trust in the honesty and integrity of the borrower. Once the inventory is sold or the receivable is collected, payment must be remitted to the lender. If there is a default, the loan is said to be secured by bogus collateral. These loans are common when the collateral is easily identified by description or serial number and then each item of collateral has relatively large dollar value. Floating Lien — A general, or blanket, lien against a group of assets, such as inventory or receivables, without the assets being specifically identified Chattel Mortgage — A lien on specifically identified personal property (assets other than real estate) backing a loan. Related Posts: MEANING AND DEFINITION OF FINANCE INTERNATIONAL TRADE AND FINANCE STARTUP COST FOR SME’S Financial Institutions: Primary sources of secured short term financing are banks and financial institutions, including insurance companies, finance companies, and the financial subsidiaries of major corporations. The best mix of short-term financing depends on: Cost of the financing method Availability of funds Timing Flexibility Degree to which the assets are encumbered It is always better to go for bank loans or loans from established and long standing private institutions because there is a leverage for the debtors to sit for discussions to sort out issued in case of defaults. All banks in India are trying to close accounts labeled under NPA- Non Performing assets either by recovering the money through one time settlement  (OTS) or by auctioning the collaterals pledged during the time of loan sanctioning. If you happen to take loans from individuals or third-parties, you...
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Current Trends in Consumer Marketing

Current Trends in Consumer Marketing
Trends in Consumer Marketing: FMCG’s: You would have often heard about this – Fast moving consumer goods. These are nothing but products that are destined for use by ultimate customers or households that cannot be done with, as their usage is on a day to day basis. It might make some sense if I cite some examples – toothpaste, soaps, shaving creams, talcs, body lotions; these are meant for personal consumption and the demand for such products is direct and needs less of relationship marketing. Brand Focus: The number of customers in the consumer market is relatively large and the product purchase is influenced by even emotional factors. The focus is on the brand name and some people ardently follow a particular brand for ages, and this might be attributed to the effect that has been created by mass media advertising, or it might be due to the fact that they might identify themselves in some or the other with the product. It becomes a personal companion over a period of time. Impulse Buying: The decision making process is informal and often simple. Sometimes, it is influenced by the budget equations and feasibility. Impulse buying is also common in consumer market. At times, the consumers go adventurous and like to try their hands on new products. Branding is an important feature that retains the customer base for business firms and that’s why market analysts are attaching so much of significance to advertisements and sales promotions, to make their product a household name. Distribution Network: The firms must have a pucca distribution network linking different parts of the territories, where they want to expand their market. Say, for instance, a soft drink can be made popular by branding, but if there is no sufficient supply in the market, how do you expect customers to support your product? Equally important is providing the customers with a product size that best suits their budget. Market Segmentation: Market segmentation recognizes the existence of distinct market groups, each with a distinct set of needs. Through segmentation, the firm directs its product and promotional efforts towards those markets that will benefit most from or will get the greatest enjoyment from its merchandise. Over the years, segmentation has become a popular strategic technique as the market is ever flushed with competitors. Influence of Price: A number of sellers are seen in this kind of consumer market and it is only the market that decides the price and not the participants. The marketers have nothing to lose if they sell at the market price, but if they plan to sell at slightly higher price levels than that of the market, it will prove detrimental to their objective. They are only price takers and not price makers. But they have the leverage to freely enter and exit the market. If the consumers foresee a fall in the general price levels of a product, they wait for some more time to take full advantage of the situation and decide to postpone the purchase. If the market shows an increasing price trend, it is the other way round, either they buy in bulk or go for substitutes.Say, if the price levels of coffee is on the rise, people opt for tea. Demand for consumer goods is price elastic. Consumers don’t care for much technical specifications; they only care for the quality backed up by a strong brand name. Post by Free MBA...
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