Kenneth wants to start a new business. To get start-up capital, he takes a short-term loan from a bank. The bank agrees to provide him the agreed-upon funds as per a legally binding commitment. However, the bank requires Kenneth to pay interest on any fund he borrows and a commitment fee based on the unused amount of funds. Which of the following short-term financing sources does Kenneth utilize to fund his business in the given scenario?
A) Factoring
B) Commercial paper
C) Trade credit
D) Revolving credit agreement

Question

Quizplus · Accepted Answer

Kenneth is using a revolving credit agreement, which involves a bank providing funds with interest on borrowed amounts and a commitment fee on unused funds.

Kenneth Wants to Start a New Business