A company seeks a one-time loan on 75% of the face value of its accounts receivable outstanding and must pay within 60 or 90 days regardless of whether it has collected its receivables. What type of financing is the company seeking?

Question

Quizplus · Accepted Answer

The financing being sought is receivables discounting, as the company is seeking a one-time loan based on a percentage of its outstanding accounts receivable, and must repay it within a specified timeframe regardless of whether they have collected the receivables. Accounts receivable factoring involves selling the accounts receivable outright to a third-party for immediate cash, and typically involves ongoing transactions. A credit note is a document provided by a seller to a buyer as a form of refund or credit. Working capital monetization and monetizing receivables are generic terms that could refer to various types of financing, but do not specifically match the criteria given in the question.

A Company Seeks a One-Time Loan on 75% of the Face