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 of
Bank XYZ agrees to lend Company XYZ the , but it requires Company XYZ to use its 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.
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