Nick has a consulting business with monthly billings of $4,000. He rents his office, hardware, and furniture and owns few assets. Nick rents his apartment, has no car, and spends most of his income on leisure. If he came to you, a bank manager, and asked to borrow $10,000 for the purpose of increasing his working capital, which of the following securities would you most likely request?
A) Assignment of accounts receivable
B) Conditional sale contract
C) Security under sections 426 and 427 of the Bank Act
D) Floating charge debenture
E) Chattel mortgage

Question

Quizplus · Accepted Answer

Since Nick's business relies on monthly billings, an assignment of accounts receivable would be the most appropriate security as it would give the bank the right to collect payments directly from Nick's clients in case of default. The other securities listed are more appropriate for businesses with significant assets or a longer operating history.

Nick Has a Consulting Business with Monthly Billings of $4,000