Accounts receivables that are assigned or pledged as collateral for a loan are referred to as secured borrowing.
Secured borrowing is the use of accounts receivable that are assigned or pledged as security for a loan. Financial products that are backed by an asset are known as secured loans. This indicates that when you apply for a secured loan, the lender will want to know which of your assets you intend to utilize as collateral. The lender will then place a lien on the asset up until the debt is entirely repaid.
Collateral serves as security for a loan that is secured. The two most common secured loan types are mortgages and auto loans, where your house or car is used as collateral. Accounts receivable pledging is the act of a corporation pledging its accounts receivable asset as collateral for a loan, sometimes a line of credit. The lender typically caps the size of the loan when receivables are utilized in this way at between 70% and 80% of the total amount of outstanding receivables.
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