Short-term loans are provided by ordinary credit institutions in the form of cash or signature credits.
These are banking transactions whose contractual deadlines must not exceed 18 months . Also the so-called revocable bank loans, or those granted with an undetermined maturity but on which the bank reserves the right to request the repayment of the sums paid out, are included among short-term loans.
With short-term financing with cash credit, the banks provide the customer with a set amount of money. Cash receivables include the current account overdraft, the discount on the commercial portfolio and the advance on invoices and bank receipts.
The current account overdraft is a short-term loan with which the bank makes available to the customer a precise sum on a current account. The accredited person can use the credit multiple times but must maintain a balance between withdrawals and remittances. The credit facility granted may be uncovered, or without guarantee, or guaranteed, or granted against a specific personal guarantee (surety, pledge, mortgage).
The current account overdraft is one of the most used short-term loans and consists in the possibility of using the amounts made available by the bank at any time and is clearly a very convenient credit line for companies.
The discount on the commercial portfolio is one of the short-term loans and consists in the conversion into money, or in the disinvestment of the credits connected to the performance of the activity which must however be incorporated in a document of a nature of a nature. This means that with the discount of the commercial portfolio the banks anticipate to the customer the amount of a credit to third parties not yet expired. The customer must then transfer the credit to the bank with the obligation, however, to repay the sum advanced in the event of the debtor’s insolvency .
Advances on invoices and bank receipts are a type of short-term loan that is granted upon presentation of the relevant documents. However, bank receipts and invoices are not like bills of credit instruments, but documents attesting to the existence of a credit and therefore the right to collect a precise sum.
Provided that the customer is considered reliable, the bank will then decide whether to grant the advance subject to collection on commercial invoices or bank receipts. It is a widespread operation, which has replaced the discount of bills and requires that the bank ascertain the economic and financial conditions of the company before crediting the sum corresponding to the value of the documents presented.