Which of the following best describes the collateral used in invoice financing?

The concept of invoice financing primarily revolves around using outstanding invoices as collateral to secure funding. When a business opts for invoice financing, it borrows money against the amounts owed by its customers. Unpaid customer invoices represent the company’s receivables, which are considered assets that can generate cash flow upon payment.

By using these invoices as collateral, the business can access working capital without having to wait for customers to pay. This is particularly advantageous for small businesses that often face cash flow challenges due to long payment terms from customers. Thus, the use of unpaid customer invoices accurately describes the type of collateral involved in this financing method.

In contrast, real estate properties and bank savings accounts are forms of collateral used in other types of financing, such as mortgages or traditional bank loans. Personal guarantees, while they may be part of the agreement for securing loans, do not directly reflect the nature of the collateral involved in invoice financing.