Warehousing

Warehousing :  Warehousing in finance refers to financing available to business, on the basis of assets held by the lender as collateral for the loans. The assets can be held either in a facility approved by the lender or a third party, or in the borrower’s facilities, with a third party assuming control of the storage site. In such cases, the lender will designate a collateral manager who certifies the value of the assets and the loan is then issued.

Warehouse financing facilitates both the borrower and lender. The borrower can secure loans on more favourable terms and the repayment of the loan can be adjusted with the actual usage of the raw materials. Also, he becomes eligible for additional financing with the build up of the assets. It also helps safeguard the lender from payment defaults. If the borrower reneges on loan repayment, then the assets held as collateral can simply be sold to recoup the costs of the loan.

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Edited and Updated 08th March 2014

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