What is the difference between factoring accounts receivable and using accounts receivable as collateral for a short-term loan?
A) Factoring is the collateral used when issuing commercial paper.
B) There is no difference.
C) Factoring involves selling the accounts receivable instead of using them to obtain a loan.
D) Factoring accounts receivable is accomplished through a finance company whereas using them as collateral is arranged with a bank.
E) Factoring involves agreeing to repurchase accounts receivable at a future date instead of using them as collateral to obtain a loan.

Question

Quizplus · Accepted Answer

Factoring involves the sale of accounts receivable to a finance company, whereas using them as collateral involves obtaining a loan from a bank with the accounts receivable pledged as security.

What Is the Difference Between Factoring Accounts Receivable and Using