Type of asset based lending, it is a short-term working capital loan secured
by the inventory
purchased. As the inventory is converted into sales
, the loan is gradually paid-off and (when it is fully satisfied) new inventory is bought
with a new loan, and the cycle
starts all over again. Inventory-financing interest rates are usually higher than for accounts-receivable financing
because in the latter-case goods
have already been sold. Also called inventory loan.