More groups turning to short-term loans

A growing number of businesses and other organizations are turning to short-term loans to relieve cash shortages. Public school districts throughout California's San Mateo County are relying on the alternative forms of financing as a temporary solution to cash-flow problems in the wake of the state's budget crisis, the San Mateo County Times reports. Some districts, including Redwood City, are employing short-term debt instruments known as Tax and Revenue Anticipation Notes. Though borrowing money means paying interest later, the loans allow the districts to meet financial obligations and defer payments to schools, the newspaper reports. "The state is not sending us the money on time," Raul Parungao, chief business official for Redwood City School District, told the newspaper. "But we continue to pay our commitments on time." That district plans to borrow between $18 million and $20 million for the 2011-2012 fiscal year, an increase from the $15 million Redwood City borrowed this year and the $7.4 million in loans it took out in the 2009-2010 fiscal year. In Texas, another organization is also seeking short-term financing to address its lack of cash, Harlingen's Valley Morning Star reports. The Harlingen Economic Development Corporation, a group dedicated to attracting investors and providing assistance to commercial developers, said it is temporarily low on funds while it waits on sales tax money from one of projects it bankrolled. As a result, the EDC is seeking a short-term loan. The company gave outdoor retailer Bass Pro Shops $4.8 million to fund construction of a new store when a previous deal in which the store's developer would have paid the construction costs fell through. That money came from the EDC's fund balance, the newspaper reports, leaving it short on cash and forcing the group to cut administrative costs. EDC chief executive officer Bill Martin told the newspaper that his company would be able to balance its budget without borrowing money, but without a loan, it would not be able to take on and pay for new projects. Budget deficits and tax revenue delays are not the only causes for cash flow problems. As the National Football League's lockout drags on, athletes have not been able to receive paychecks and, lacking cash, have been seeking out short-term loans, ThePostGame.com reports.