Business FinancesQuestion 1230 of 1632
A contractor factors (sells) $50,000 of receivables to a factor who advances 90% now and charges a 3% fee on the face amount. How much cash does the contractor receive up front, and what is the fee?
a.$50,000 advance; $1,500 fee
b.$45,000 advance; $1,500 fee
c.$45,000 advance; $3,000 fee
d.$47,000 advance; $0 fee
Explanation
Advance = 90% x $50,000 = $45,000 up front. Fee = 3% x $50,000 = $1,500. Factoring speeds cash but at a cost, reducing the effective amount collected.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)