If the corporation needed additional operating capital for expansion, it could have short-term loans and long-term debt funding such as bond issuance. Additionally, the firm may have found support from Angel investors or Venture Capitalists. Taking short-term loans or commercial paper means the money is only attainable for a limited period. Thus, the business must rapidly make profits and pay back the debt. Regrettably, the organization may not be able to do so since acquiring such loans necessitates insurance provision in the form of security or an account receivable. The firm does not have a large enough tangible asset to justify such protection.
Long-term loans are often correlated with high interests and a long-term obligation to repay. Regardless of the loss, the firm should pay the principal and interest. Evidently, venture capitalists will demand a considerable return and exert pressure on the company, which will affect its operations. These investors want their money back quickly, so they are not attracted to a long-term plan.