Factoring is a popular short-term finance option for many small enterprises because Small businesses frequently struggle to obtain bank loans. So, "small firms often find it difficult to qualify for bank loans" is the correct answer.
Why do small businesses rely on short-term financing?
Short-term loans are more common for small firms than long-term debt funding.
Short-term loans are frequently preferred by businesses over factoring or merchant cash advances, which have higher interest rates and terms.
An unsecured business line of credit may be more difficult to obtain than this sort of loan.
Check out the link below to know more about short-term financing;