After determining the level of working capital, a firm has to decide how it is to be financed. The need for financing arises mainly because the investment in working capital current assets, that is, raw materials, work stock in process. finished goods and receivables typically fluctuates during the year. The present chapter discusses the main sources of finance for working capital. Although long term funds partly finance current assets and provide the margin money for working capital, such assets working capital are virtually exclusively supported by short term sources. The main sources of working capital financing, namely, trade credit, bank credit, commercial papers and factoring are covered in Sections 1-4. The major points are summarized in the last Section.

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