Self-Liquidating Loan

AAA

DEFINITION of 'Self-Liquidating Loan'

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.

INVESTOPEDIA EXPLAINS 'Self-Liquidating Loan'

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".

RELATED TERMS
  1. Operating Cost

    Expenses associated with administering a business on a day to ...
  2. Renegotiated Loan

    The result of an agreement between a borrower and a lender to ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the ...
  4. Term Loan

    A loan from a bank for a specific amount that has a specified ...
  5. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
  6. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
Related Articles
  1. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  2. Retirement

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  3. Options & Futures

    Payday Loans Don't Pay

    Hold too tightly to this rescue line and you'll soon be drowning in debt.
  4. Options & Futures

    Borrowing Smart In A Debt-Filled World

    Leveraging your money can have many perks, but it's not always the smartest financial plan.
  5. Entrepreneurship

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
  6. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  7. Stock Analysis

    Will American Airlines Fall Back To Earth In 2015?

    The airline industry enjoys blockbuster profits, and American Airlines Group has been a key beneficiary of the favorable trends that have lifted stocks.
  8. Stock Analysis

    Qualcomm's New Buyback Program Is Well-Timed

    Qualcomm announced after market close on Monday that they had approved a new stock buyback program, authorizing to repurchase $15 billion in shares.
  9. Professionals

    Is Now the Time for Junk Bonds?

    A bet on high-yield bonds is a bet that the global economy will continue to improve...but not too much.
  10. Investing

    What is Debt Financing?

    When a company needs to pay for something, it can pay with cash, or it may finance the purchase. Financing means that it gets the money from other businesses or sources, in return for obligations. ...

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center