Kea owns a wholesale nursery that sells potted plants to large retail outlets. T
ID: 2634825 • Letter: K
Question
Kea owns a wholesale nursery that sells potted plants to large retail outlets. These sales are seasonal in nature. Kea cannot afford to wait for payment from the retailers as they often take 60 days or more to pay. Kea has only been in business for three years. Due to the nature of her business, Kea's bank is not willing to accept responsibility for collecting the receivables. The type of financing that is most appropriate for Kea's situation is:
Floor plan financing.
Accounts receivable factoring.
A bank loan secured with a blanket lien.
Bankers acceptance.
Commercial paper.
Explanation / Answer
The best loan for Kia is:
A bank loan secured with a blanket lien.
Reason: This will allow her to achieve flexible financing that she needs. It will allow her to take a loan against her credit line when customers have not paid yet. Then when money comes in and she no longer needs the loan, she cam pay it off and in a later month finance again what may be needed.
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