Pledging accounts receivable may limit a firm's ability to borrow from a bank because this practice removes a prime asset from the firm's available collateral.

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Pledging accounts receivable means using them as collateral for a loan, which reduces the amount of collateral available to secure other loans. This may limit a firm's ability to borrow from a bank as the bank may require a certain amount of collateral to approve a loan.

Pledging Accounts Receivable May Limit a Firm's Ability to Borrow