Question

Shelly has a business that requires her to take out a loan to finance short-term working capital needs since she extends credit repayment terms to her customers. Her working capital needs vary over time depending on her customer orders. The best type of loan financing for this is a_____________.
a. Revolving loan
b. Term loan
c. Secured loan
d. None of these are correct

Answer 1

Answer:

Revolving loan

Explanation:

A revolving loan can be described as a loan that has a fixed monthly repayment. The interest rate that will be paid depends on the individual previous credit score and well as how well the individual can afford it.

The revolving loan provides access to a rolling credit facility, it enables the individual to borrow some amount of money again which could be up to your original loan amount, as long as a certain percentage of the loan has been repaid.

A revolving credit loan helps to provide cash for the business day-to-day activities thereby leading to an effective cash flow management for small businesses.