Which financing source is typically used to cover immediate cash flow needs?

Short-term loans are primarily utilized to address immediate cash flow needs. These loans are designed to provide quick access to capital for businesses that require funds to manage operational expenses, inventory purchases, or other short-term liquidity issues. They are typically repayable within a year, which suits situations where funds are needed promptly and cash may later be available to meet these obligations.

In contrast, equity financing involves raising capital by selling shares in the company, which is generally a longer-term funding strategy that doesn't address immediate cash flow issues. Long-term loans are structured for larger borrowing amounts and extended repayment terms, making them unsuitable for urgent cash flow requirements. Preferred share issuance also represents a long-term financial strategy where companies raise capital by selling shares that have preference over common stock but require a longer time horizon to impact cash flow effectively.