What it is:
How it works (Example):
Let's assume Company XYZ wants to borrow $2 million to expand its operations. It has used up all of its line ofwith its regular bank, so it asks Bank XYZ for warehouse financing.
Bank XYZ agrees to lend Company XYZ the inventory of widgets as collateral. Accordingly, Company XYZ moves $2 million worth of widgets to a warehouse controlled by the bank. The bank keeps close count of the widgets, and it the loan payments on Company XYZ's of the widgets over time., but it requires Company XYZ to use its
Why it Matters:
Warehouse financing allows companies to borrow terms than other forms of short-term financing. In many cases, borrowers can keep the in their existing warehouses, and the often require them to separate the collateral inventory from the rest of the inventory with a fence and signage.using as , and often on better, more flexible