What distinguishes secured receivables from unsecured receivables?

Secured receivables are characterized by the presence of collateral that backs the debt. This means that in the event the borrower defaults on the loan, the lender has a legal claim to the specified asset or assets that serve as collateral, which can be seized to recover the outstanding amount. This provides an additional layer of security for the lender compared to unsecured receivables, which do not have such backing. Unsecured receivables rely solely on the creditworthiness of the borrower for repayment; therefore, they carry a higher risk for lenders.

The other options do not accurately describe the fundamental differentiation between secured and unsecured receivables. For instance, while secured receivables may often have a fixed payment schedule, this feature is not exclusive to them and does not define them. Furthermore, secured receivables are not inherently prioritized for payment over others unless stated in a legal agreement, and they can be applicable to both individual and business scenarios, not just limited to businesses. Thus, the defining characteristic of secured receivables is indeed their backing by collateral.