Why will banks extend short-term working capital financing to companies to which they would not extend long-term credit?
A) Conditions are unlikely to deteriorate too badly in the short term.
B) Working capital loans are "self-liquidating."
C) The working capital itself can be used to collateralize the loan.
D) All of the above

Question

Quizplus · Accepted Answer

Banks extend short-term working capital financing because the risk of conditions deteriorating is lower in the short term, working capital loans are self-liquidating as they are repaid from the company's operating cash flow, and the working capital can serve as collateral.

Why Will Banks Extend Short-Term Working Capital Financing to Companies