What is the term for using receivables as collateral for a loan while retaining the responsibility for collecting them?

The term for using receivables as collateral for a loan while retaining the responsibility for collecting them is known as the pledging of accounts receivable. This process allows a business to leverage its receivables to secure financing, enabling it to receive immediate cash without selling its outstanding invoices. In this arrangement, the business maintains control over the accounts receivable and continues to collect payments from its customers, fulfilling its obligation even while the receivables are pledged as security for the loan.

This method can provide businesses with flexibility and liquidity, as it does not involve transferring ownership of the receivables. It is particularly useful for companies that have a steady flow of receivables and require quick access to cash for operations or growth initiatives. By pledging accounts receivable, businesses can often negotiate favorable terms with lenders based on the quality and reliability of their receivables.