Accounts receivables to obtain an additional bank loan

Reference no: EM1354807

Assume you started a new business last year with $60,000 of your own money that was used to purchase equipment. Now you are seeking a $30,000 loan to finance the inventory needed to reach this year's sales target. You have agreed to pledge your venture's delivery truck and your personal automobile as support for the loan. Your sister also has agreed to cosign the loan. During your initial year of operation, you paid your suppliers in a timely fashion.

A. (finished)

B. Assume you are currently carrying an accounts receivable balance of $20,000. How might you use accounts receivables to obtain an additional bank loan?

C. Assume at the end of next year, you will have an accounts receivable balance of $25,000 and an inventories balance of $35,000. If a bank normally lends an amount equal to 80 percent of accounts receivable and 50 percent of inventories pledged as collateral, what would be the amount of a bank loan a year from now?

Reference no: EM1354807

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