Final answer:
A firm can borrow money up to a specified limit with an agreed-upon interest rate through a bank loan. This type of borrowing is often more suited for smaller firms requiring more customized financing solutions as opposed to issuing bonds. Therefore, the correct option is D.
Step-by-step explanation:
When a firm is interested in borrowing funds, it can do so primarily through two methods: using banks or issuing bonds. With a bank loan, a firm can borrow up to a certain limit with an agreed-upon interest rate. This arrangement allows the firm to take out a specified amount of money and promises to repay it along with the interest over a set period of time.
Should the firm struggle to adhere to its repayment schedule, the bank has the right to take legal action, potentially resulting in the forced sale of the firm's assets to cover the debt. Unlike bond issuance, which is typically pursued by relatively larger and well-known firms, bank loans are often more suited to smaller companies due to the personalized nature of the service and the closer relationship between the bank and the firm.