Answer (C) is correct . A small retail store would not have access to major capital markets. In fact, the only options available, outside of owner financing, are bank loans and a line of credit from suppliers. It is this latter alternative that is most often used because it permits the store to finance inventories for 30 to 60 days without incurring interest cost. A line of credit is an arrangement between a bank and a borrower in which the bank commits itself to lend up to a certain maximum amount to the borrower in a given period.
Answer (A) is incorrect because Only large companies with excellent credit ratings have access to the commercial paper market.
Answer (B) is incorrect because A retail store must have instant access to its inventory to provide continuous services to customers. Thus, a loan on a terminal warehouse receipt loan would not be suitable because the inventory would not be in the immediate possession of the seller.
Answer (D) is incorrect because A chattel mortgage is most often used for financing moveable equipment. It is not well-suited to financing inventory of a small retailer with high turnover because of the difficulty of identification.
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