Kea owns a wholesale nursery that sells potted plants to large retail outlets. These sales are seasonal in nature. Kea cannot afford to wait for payment from the retailers as they often take 60
Days or more to pay. Kea has only been in business for three years. Due to the nature of her
Business, Kea's bank is not willing to accept responsibility for collecting the receivables. The type of
ﬁnancing that is most appropriate for Kea's situation is:

Question

Quizplus · Accepted Answer

Accounts receivable factoring is the most appropriate financing option for Kea's situation because it allows her to sell her receivables to a third-party (factor) at a discount, who then assumes responsibility for collecting payment from the retailers. This provides Kea with immediate cash flow to meet her working capital needs without having to wait for payment from the retailers. As Kea's bank is not willing to accept responsibility for collecting the receivables, commercial paper, banker's acceptance, floor plan financing, and a bank loan secured with a blanket lien are not viable financing options.

Kea Owns a Wholesale Nursery That Sells Potted Plants to Large