Question

If a business is in need of working capital, one option is to use a(n) ________ that will buy the company's account receivables and then handle their collection for a fee.

factoring company
equity fund
trade creditor
bank

Answer 1

Factoring company

Step-by-step explanation:

Answer 2

factoring company

Step-by-step explanation:

Factoring companies purchase your company's invoices (account receivables). When they do that, your company promptly receives a cash advance, instead of waiting for the usual 60, 90 day period to receive the full payment amount. Afterward, the factoring company collects the payment from your clients.

All of that is done for a fee to the factoring company (deducted from the full payment amount) and mostly with clients with whom it is normal to have longer payment periods. Factoring is an essential way to get bigger working capital.