One of the big risks a lender takes, of course, is that you may not be able to repay the loan. Secured loans overcome this risk for the lender. A secured loan means you have to put up some of your property as collateral against the loan. On the other hand, if you have a good credit reputation and the loan is only for a short period of time, you'll probably qualify for an unsecured loan and not have to pledge property at all. Short term borrowing Short-term borrowing is usually used to finance assets that turn over quickly such as accounts receivable and stock.
Many businesses use short-term finance.
For example, wholesalers and manufacturers use it to cover their costs until the end of their selling seasons. Short term borrowings are usually repaid over a term of just one year or less. Long term borrowing Long-term borrowing is used to finance fixed assets. These can include vehicles, equipment, plant, buildings and property. It can also be used to finance the purchase of an existing business, establish a new one, or to provide additional working capital.