Generally, banks lend up to the following amount when firms provide receivables as collateral:

Question

Quizplus · Accepted Answer

Banks typically lend up to 80% of the value of the receivables when they are used as collateral. This is because there is a certain level of risk associated with the collectability of the receivables, and the bank wants to protect themselves in case the borrower defaults on the loan. Lending 100% of the value of the receivables would put the bank in a very risky position, while lending only 50% or 60% would not be enough to provide the necessary funding for the borrower.

Generally, Banks Lend Up to the Following Amount When Firms