New RBI Grade B 2025 Notification will come Soon! Enroll Here

    Question

    Which of the following financial instruments is most

    likely to be utilized by an MSME to secure working capital funding without the need for tangible collateral, especially when dealing with large receivables?
    A Trade Receivables Securitization Correct Answer Incorrect Answer
    B Commercial Paper for Short-Term Borrowing Correct Answer Incorrect Answer
    C Long-Term Bonds for Capital Expansion Correct Answer Incorrect Answer
    D Term Loans with Fixed Repayment Terms Correct Answer Incorrect Answer
    E Equity Financing through a Public Offering Correct Answer Incorrect Answer

    Solution

      Trade receivables securitization allows MSMEs to convert their receivables into immediate working capital funding. By selling receivables to a third party (typically a financial institution), MSMEs can receive liquidity upfront, without the need for tangible collateral, making it an attractive option for businesses with significant outstanding invoices.

    Practice Next