In discounted accounts receivable financing,a small business can typically borrow an amount equal to ________ percent of its receivables it pledges as collateral.
A)10 - 25
B)35 - 50
C)55 - 80
D)80 - 95

Question

Quizplus · Accepted Answer

In discounted accounts receivable financing, a small business can typically borrow an amount equal to 55-80% of its receivables that it pledges as collateral. This type of financing is also known as factoring, where a business can sell its unpaid invoices to a third-party (factor) at a discount to receive immediate cash. The amount of borrowing depends on the creditworthiness of the customer, as the factor takes on the risk of collecting the payment from the customer. Hence, the higher the creditworthiness of the customer, the greater the amount that can be borrowed.

In Discounted Accounts Receivable Financing,a Small Business Can Typically Borrow