Short-Term Financing

Definition ∞ Short-term financing involves obtaining capital that must be repaid within a period of one year or less, typically used to cover immediate operational expenses or working capital needs. This type of funding is essential for managing cash flow and addressing temporary liquidity shortages. Common forms include lines of credit, commercial paper, and short-term loans.
Context ∞ In the digital asset economy, short-term financing mechanisms are rapidly evolving, particularly within decentralized finance protocols. The situation involves platforms offering flash loans, collateralized debt positions, and other innovative instruments that provide rapid access to capital for trading or liquidity provision. A key debate centers on the risks associated with highly leveraged short-term positions and the potential for systemic instability in DeFi markets.