Which types of assets are commonly pledged as collateral in equipment finance arrangements?

• A. Real estate only.
• B. Cash only.
• C. IP, equipment, and lease payments.
• D. Intangible assets only.

Answer: (C)

In equipment financing, the security package is built from assets that have clear value and can be claimed if the borrower defaults. The financed equipment itself is the primary collateral, since the lender can repossess that asset if payments stop. In addition, the right to the future lease payments tied to the equipment often serves as collateral, securing the lender with the actual cash flows expected from the arrangement. Intangible assets like IP can also be pledged when they have demonstrable value and a viable liquidation path, adding another layer of security. This mix—the equipment, the stream of lease payments, and the potential IP value—is why this option best reflects common collateral in equipment finance. The other choices are too narrow, focusing on single asset types rather than the practical combination typically used.