Final answer:
The transfer of receivables can be done through factoring or assignment. Factoring is the sale of receivables to a third party, while assignment involves using receivables as loan collateral. These are distinct from borrowing methods such as bank loans or bonds.
Step-by-step explanation:
The transfer of receivables to a third party can be accomplished in two main ways: factoring and assignment of receivables. Factoring involves a business selling its accounts receivable to a third party, called a factor, at a discount. The factor then assumes the risk of collecting the receivables and provides the business with immediate cash flow. Assignment of receivables is when a business uses its receivables as collateral for a loan, where the lender has the right to collect the receivables if the business fails to repay the loan.
These methods are different from borrowing through banks and issuing bonds. When a firm borrows from banks, they may need to fill out forms detailing their income sources and undergo credit checks. In addition, banks might require a cosigner or collateral. Issuing bonds involves raising capital by selling debt securities to investors, who receive periodic interest payments until the bond matures.