The use of inventory as collateral to raise finance in lieu of traditional types of collateral such as land or property. In different countries worldwide, banks usually accept to lend businesses against stocks of products held in bonded warehouses (e.g., agricultural produce) on the condition that the stored product will be available should need arise to call on the collateral. Furthermore, at the time of lending, banks restrict loan amounts to a specific percentage of the value of the inventory (50%, 60%, etc) in order to account for possible falls in commodity prices over the loan tenor.
Business
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