National Payday Scholarship 2012 Official Entry SealBy: Erick Vargas

In today’s fast moving, instantly gratifying economic world, a system of finance that matches or even parallels the speed at which business through exchanges of capital and goods takes place is extremely necessary and beneficial to individuals worldwide. Today, this system of finance or capital outlet is known as short-term financing; a procedure well renowned for its usefulness and reliability on an expedited notice. Within circumstantial scenarios, short-term financing can be invaluable to an individual in a world where capital dictates one’s success. From an individual purchasing a good or service to a small business in need of funds, short-term financing has been known as the “safety net” during rough times that consumers and businesses can count on every time.

Picture the owner of a small business who has recently missed breaking even on his last financial quarter as a result of a slow flow of capital. That small business now lacks the proper funds to purchase the supplies with which it provides its services and is expecting to close due to a bad quarter and inability to operate any further if short-term financing was unavailable. However, because of the availability of short-term financing, the business owner is able to get a line of credit that can be used to continue the operation of the business and thus maintains the market for small businesses until the market for services which the business provides rises once more and it can return or pay off the money it has borrowed. Simply looking at the issue of small businesses, we can see that short-term financing is vital to avoid the monopolization of market sectors.

For instance, look to local and chain supermarkets. If a local supermarket were to fail due to its inability to partake in short-term financing, it would eliminate its presence in the area for which it provided its service, thereby leaving an empty space to be taken up by a larger, national supermarket chain. If there are multiple local supermarkets that shut down because of a downturn in capital flow and inability to continue operation, the process will continue until a general area is dominated by a supermarket chain or an overarching company that now controls the goods provided in that area, which finances its various locations by balancing the net increases and decreases in capital flow to continue operation. Due to the fact that food becomes a necessity for consumers, they are forced to shop in the available supermarket, which leads to a monopoly of the supermarket in that area.

The monopolization of a resource creates a difficult situation where price increases take place, and with the consumers being unable to purchase goods from a different provider, they are left with no other option but to purchase these goods at a higher price. The consequential damages of the lack of short-term financing for individuals and small businesses can really become damaging to a national economy. The capital outlets that small businesses run by individuals provide are invaluable because of the competition they provide against large, national conglomerates. This allows consumers to have a wider range of choices and prevent the domination of a market by a certain entity, which as a result makes short-term financing essential for companies who don’t have any other method of maintaining their business operational.

In the case of individuals, short-term financing is vital for making ends meet in a household or when an individual is at an entry level job. When someone is just beginning to make a life for themselves and are most vulnerable economically, it is vital that they have the support of short-term financing in order to be able to purchase necessities and pay bills when finances become rough. Without short-term financing, these individuals succumb below the poverty line and become homeless and unemployed, unable to free themselves of their financial constraints. In regards to individuals already in financial difficulty, short-term finance provides options to individuals who are already endangered by their economic status. For the poor, homeless, indebted, orphaned, or even disabled, short-term financing provides an availability of funds so these people can start over on a clean slate, get employed, have a roof over their heads, and feed themselves. Short-term financing is a quintessential cog to the machine that is the perceived American Dream and without it; the United States would not wholly be the land of opportunity.

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