Short-Term Debt
Borrowings due within one year, classified as current liabilities and used to fund short-term working capital needs.
What is Short-Term Debt?
Short-term debt consists of borrowings that must be repaid within one year, classified as current liabilities on the balance sheet. It includes commercial paper, revolving credit facilities, short-term bank loans, and the current portion of long-term debt (the principal payments due in the next 12 months). Companies use short-term debt to bridge temporary gaps in working capital, fund seasonal inventory builds, or finance short-term projects. Because it carries a near-term repayment obligation, high levels of short-term debt relative to current assets can signal liquidity risk. Short-term interest rates typically apply, making short-term debt cheaper than long-term borrowing but subject to refinancing risk.
Example
A retailer regularly issues $2 billion in commercial paper — a form of short-term unsecured debt maturing in 30–90 days — to fund seasonal inventory purchases ahead of the holiday shopping season. The commercial paper is classified as short-term debt on the balance sheet. If credit markets tighten and the retailer cannot roll over the commercial paper at maturity, it faces a liquidity crisis. Most large retailers therefore maintain committed credit lines as backup liquidity to mitigate this refinancing risk.
Source: Investopedia — Short-Term Debt