Discuss and contrast the three types of loans discussed in the text th

Discuss and contrast the three types of loans discussed in the text that use inventory as collateral: floating inventory liens, trust receipt inventory loans, and warehouse receipt loans.

What will be an ideal response?

ANSWER

A floating inventory lien is certainly the easiest for a firm since the lender just takes a lien against the firm’s entire inventory and the borrower typically does not have to give the lender a precise list 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. A terminal warehouse is a central warehouse storing the merchandise of various customers.