What Is the Difference Between Factoring Accounts Receivable and Pledging

question 183

Multiple Choice

What is the difference between factoring accounts receivable and pledging accounts receivable as collateral for a short-term loan?

• A) Factoring is the collateral used when issuing commercial paper.
• B) Factoring involves selling the accounts receivable instead of using them to obtain a loan.
• C) Factoring accounts receivable is accomplished through a finance company whereas using pledging accounts receivable as collateral is arranged with a bank.
• D) Factoring involves agreeing to repurchase accounts receivable at a future date instead of using them as collateral to obtain a loan.
• E) There is no difference between factory accounts receivable and pledging accounts receivable.

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