on line dating research - Self liquidating loan definition

David Allen explains why the world of pensions is in turmoil.A loan used to finance the purchase of assets intended to be sold within a short period of time.

self liquidating loan definition-82

For example, a company may use a self-liquidating loan to pay for its inventory, which it intends to quickly sell.

It is called a self-liquidating loan because the proceeds from the sale of the assets provide the capital with which the debtor may repay the loan.

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A type of short- or intermediate-term credit that is repaid with money generated by the assets it is used to purchase.

Its popularity waned a bit during the high inflation and interest rates of the early 1980s, but picked back up after interest and inflation rates dropped later in that decade.

As of the fourth quarter of 2012, the 30-year fixed rate mortgage, which is self-liquidating, was the most popular type of mortgage in the United States.Mortgages were originally interest-only loans that needed to be refinanced every five or so years.After the Great Depression, self-liquidating loans became more prevalent due to support from the Federal Housing Administration and the growth of the savings-and-loan industry.Then the borrower takes the revenue generated from those business activities and uses it to repay the money that was borrowed to finance the activities.The term can apply to a company that experiences seasonal fluctuations in business.During the busy season when business is booming the company needs to borrow money to finance short-term assets such as inventory and accounts receivable.

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