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List and describe the three basic types of secured inventory loans. What are the advantages and disadvantages of each type of loan?
On Sep 23, 2024
The three types are general security agreement, trust receipts, and field warehouse financing. The general security agreement is certainly the easiest for the firm since the lender just takes a lien against all of the firm's inventory and the borrower typically does not have to give the lender precise lists of what constitutes inventory on a regular basis. Trust receipt financing requires the borrower and lender to specify the exact inventory that backs up each advance. This can be a time-consuming and cumbersome type of financing for the firm. Field warehouse financing requires an independent company to supervise the collateral for the lender. This, too, can be a cumbersome type of financing.