Introduction to Finance

blanket inventory lien 
claim 
against a inventory when individual 
items are indistinguishable
trust receipt 
lien against specifi c 
identifi able items in inventory; with 
this arrangement, the bank retains 
ownership of the goods until they 
are sold in the regular course of 
business
warehouse receipt 
issued by the 
warehouse, indicating inventory is 
placed in a bonded warehouse for 
safekeeping; items are removed as 
they are paid for
fi eld warehouse 
a warehouse 
on the grounds of the borrowing 
business establishment
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Inventory loans, like receivable loans, are made by commercial fi nance companies. Their interest rates usually are 
higher than those charged by banks.
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Firms can obtain loans against the fi rm’s equipment used in its operations as well as what might be manufactured 
or sold from inventory.

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C H A PT E R 1 6 Short-Term Business Financing
and the information saved electronically for later recall. Business-to-business (B2B) auction 
sites and even eBay auction prices have been used to estimate an item’s value.
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Loans Secured by Stocks and Bonds 
Stocks and bonds are often used as collateral for short-term loans. These securities are wel-
comed as collateral primarily because of their marketability and their value. If the securities 
are highly marketable and if their value is high enough to cover the amount of the loan reques-
ted even if the stock’s price goes down somewhat, a banker will extend a loan. Securities listed 
on one of the national exchanges are preferred because frequent price quotations are available. 
Banks will usually loan from 60 to 70 percent of the market value of listed stocks and from 70 
to 80 percent of the market value of high-grade bonds.
Only assignable stocks and bonds are eligible for this type of collateral fi nancing with the 
exception of nonassignable U.S. savings bonds. When assignable securities are placed with 
a bank, a stock or bond power is executed that authorizes the bank to sell or dispose of the 
securities should it become necessary to do so to protect the loan.
Other Forms of Security for Loans 
Security for short-term bank loans may include the cash surrender value of life insurance 
policies, guarantee of a loan by a party other than the borrower, notes, and acceptances.