Question

Renita works as a freelancer. she wants to start her own business, but she does not have the required funding. to meet the working capital for her business, she takes a short-term loan from a bank. the bank agrees to provide her funding up to $50,000, as and when she needs it. however, she can repay the amount immediately or over a pre-specified period of time. which of the following short-term financing sources does renita utilize to fund her business in the given scenario? a. line of creditb. trade creditc. commercial paperd. factoring

Answer 1

a. line of credit

Step-by-step explanation:

Line of credit is means of short term financing wherein a borrower can utilize a credit limit upto which he can borrow money.

Line of credit defines the maximum amount a borrower can draw. For e.g a credit card is similar to line of credit

It is a flexible mode of financing since it allows a borrower to draw out as much and as frequently until the credit limit is reached.

Also, it allows the borrower to repay the money immediately or within a specified period of time.