Trust receipt loans are generally used by new car dealers to finance their inventories
The bank offers short-term financing in the form of Trust Receipts (T/R), wherein the bank will make advance payments for products and services on behalf of buyers or importers. The buyer or importer will pay the bank on the maturity date according to the T/R term.
Distributors and dealers who deal in expensive items sometimes utilize trust receipts; they receive the inventory through trust receipt agreements with their lenders and then repay the lenders as the inventory is sold. Trust receipt contracts fall under the category of asset-based lending.
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