Self-Liquidating Debt
Jump to navigation
Jump to search
A Self-Liquidating Debt is an economic debt that is repaid with money generated by the financed assets.
- Context:
- It can (usually) be a Working Capital Loan.
- It can (typically) range from being a Short-Term Self-Liquidating Debt to being an Intermediate Self-Liquidating Debt.
- …
- Counter-Example(s):
- See: Home Mortgage, Securitized Loan.
References
2015
- http://www.investopedia.com/terms/s/self-liquidating-loan.asp
- QUOTE: A type of short- or intermediate-term credit that is repaid with money generated by the assets it is used to purchase. The repayment schedule and maturity of a self-liquidating loan are designed to coincide with the timing of the assets' income generation. These loans are intended to finance purchases that will quickly and reliably generate cash.
A business might use a self-liquidating loan to purchase extra inventory in anticipation of the holiday shopping season. The revenue generated from selling that inventory would be used to repay the loan. Self-liquidating loans are not always a good credit choice. For example, they do not make sense for fixed assets, such as real estate, or depreciable assets, such as machinery. There are also a number of scams that call themselves "self-liquidating loans".
- QUOTE: A type of short- or intermediate-term credit that is repaid with money generated by the assets it is used to purchase. The repayment schedule and maturity of a self-liquidating loan are designed to coincide with the timing of the assets' income generation. These loans are intended to finance purchases that will quickly and reliably generate cash.
2014
- http://www.businessdictionary.com/definition/self-liquidating-loan.html
- QUOTE: Short-term (usually working capital) loan that is repaid from the subsequent conversion of the asset being financed (raw materials, seeds, fertilizer) into sales revenue.