The definition of asset-Conversion loan’
Loan asset-transformation is a short-term loan that is usually repaid through liquidation of the asset, usually inventory or receivables. Asset conversion loans are sometimes used by companies with highly seasonal businesses, such as those who earn most of their income at Christmas.
Penetration of asset-Conversion loan’
For example, a company producing toys, you may have to pay its employees in mid-November, but the money for it put most of its resources to produce and sell toys that will not be purchased until Dec. One version of the toy companies can learn to get an asset-conversion loan. It may take a conversion of a loan asset and simultaneously agree to put the truck for sale, for example. When the truck is sold, the loan is repaid. If it does not sell, toy company will be in default on the loan, and the lender will have the truck as collateral.
Depending on its creditworthiness, the toy company may have other short-term borrowings. It can provide a line of credit or taking out a loan using truck as collateral and pay a loan for a longer period. Thus, he could keep the car as long as he continues to make payments on the loan.