By anticipating times when many bills will come due, a business can begin early to seek funds and prepare for the crunch. A line of credit is not guaranteed. The purpose of a line of credit is to speed the borrowing process. Commercial finance companies are willing to accept higher degrees of risk than commercial banks. The factor then collects and keeps the money that was owed the firm.
Factoring is very popular among small businesses.
Factoring is not a loan-it is the sale of an asset. Factoring charges are much lower if the company assumes the risk of those accounts who don't pay at all. Commercial paper is unsecured and is sold at a public sale, so only financially stable firms are able to sell it. Identify and describe several sources of long-term financing. The financial plan specifies the amount of funding that the firm will need over various time periods and the most appropriate sources of those funds.