In financial contexts, what does a receivables pledge typically secure?

In financial contexts, what does a receivables pledge typically secure?

• A. Funds set aside for emergency purposes
• B. Specific equity in real estate transactions
• C. Income generated from accounts receivable, such as rental income
• D. A company’s cash reserves

Answer: (C)

A receivables pledge typically secures income generated from accounts receivable, which includes amounts owed to a business from its customers for goods or services provided but not yet paid for. This type of security interest allows a lender to claim the receivables as collateral in the event that the borrowing entity defaults on a loan. In the context of real estate, this can encompass rental income that the property owner expects to receive. By using accounts receivable as collateral, the business can access financing while allowing lenders some assurance of repayment based on anticipated cash flows from these receivables. The other options do not align with the nature of a receivables pledge. Funds set aside for emergencies, specific equity in real estate transactions, and a company's cash reserves represent different types of financial assets or allocations that are not directly tied to the income streams generated from accounts receivable. Thus, they do not serve the same purpose as a receivables pledge in securing financing against future income.

A receivables pledge typically secures income generated from accounts receivable, which includes amounts owed to a business from its customers for goods or services provided but not yet paid for. This type of security interest allows a lender to claim the receivables as collateral in the event that the borrowing entity defaults on a loan. In the context of real estate, this can encompass rental income that the property owner expects to receive. By using accounts receivable as collateral, the business can access financing while allowing lenders some assurance of repayment based on anticipated cash flows from these receivables.

The other options do not align with the nature of a receivables pledge. Funds set aside for emergencies, specific equity in real estate transactions, and a company's cash reserves represent different types of financial assets or allocations that are not directly tied to the income streams generated from accounts receivable. Thus, they do not serve the same purpose as a receivables pledge in securing financing against future income.