When the bank advances a large percentage of the invoice price of goods and is paid on a pro-rata basis when inventory is sold this is called:
A) a trust receipt.
B) a factoring arrangement.
C) an accounts payable loan.
D) a sale-leaseback arrangement.

Question

Quizplus · Accepted Answer

A trust receipt is a financing arrangement where the bank advances a significant portion of the invoice price of goods to a borrower, and repayment is made as the inventory is sold. This allows businesses to manage cash flow more effectively by not having to pay for the entire inventory upfront.

When the Bank Advances a Large Percentage of the Invoice