Many small businesses rely on factoring as a source of short-term financing because
A) factoring provides a much cheaper source of funds than bank loans.
B) interest paid to a factor qualifies for a tax credit.
C) small firms often find it difficult to qualify for bank loans.
D) loans provided by factors do not require collateral.

Question

Quizplus · Accepted Answer

Factoring is the sale of accounts receivables at a discount for cash. Since factoring involves a sale of an asset, the funds received are not a loan. Small businesses often find it difficult to obtain loans from bankers. These same firms often can obtain the needed funds from factors if their customers are judged to be creditworthy.

Many Small Businesses Rely on Factoring as a Source of Short-Term