Warehouse Financing

AAA

DEFINITION of 'Warehouse Financing'

A form of inventory financing in which loans are made to manufacturers and processors on the basis of goods or commodities held in trust as collateral for the loans. The goods may be held in public warehouses approved by the lender, or may be held in field warehouses located in the borrower's facilities but controlled by an independent third party. A financial institution engaged in warehouse financing will usually designate a collateral manager who issues a warehouse receipt to the borrower that certifies the quantity and quality of the stored goods or commodities.

INVESTOPEDIA EXPLAINS 'Warehouse Financing'

Warehouse financing offers a number of benefits to the borrower. It leverages the use of raw material as the primary collateral, while additional financing can be synchronized with the build-up of the stock. Warehouse financing also enables borrowers to obtain financing on more favorable terms than short-term working capital or loans, while the repayment schedule can be coordinated with the actual usage of raw material.

RELATED TERMS
  1. Working Capital

    This ratio indicates whether a company has enough short term ...
  2. Warehouse-To-Warehouse Clause

    A clause in an insurance policy that provides for coverage of ...
  3. Warehouse Bond

    A type of financial protection that assures an individual or ...
  4. Warehouser's Liability Form

    A document that describes the obligations of a storage facility ...
  5. Warehouse Receipt

    A receipt used in futures markets to guarantee the quantity and ...
  6. Carrying Cost Of Inventory

    This is the cost a business incurs over a certain period of time, ...
RELATED FAQS
  1. What other precious metals are there beyond gold and silver?

    Besides gold and silver, the other precious metals are platinum, palladium, ruthenium, rhodium, osmium, rhenium, germanium, ... Read Full Answer >>
  2. What countries have the largest gold reserves?

    The United States holds the largest stockpile of gold reserves in the world by a considerable margin. In fact, the U.S. government ... Read Full Answer >>
  3. What commodities are not tradable?

    As of February 2015, commodities that are not tradable include diamonds, tomatoes, carbon dioxide, lemons, eggs, potatoes, ... Read Full Answer >>
  4. What are the main benchmarks for tracking the performance of the metals and mining ...

    Benchmarks serve as initial points of reference against which portfolios, individual stocks or stock sectors can be compared ... Read Full Answer >>
  5. What companies are positioned to grow from the popularity of ETFs?

    Some of the companies best-positioned to benefit from the explosion in the popularity of exchange-traded funds (ETFs) are ... Read Full Answer >>
  6. Are commodities the same as consumables?

    Some commodities are consumables, but not all consumables are commodities. Commodities encompass the raw materials used to ... Read Full Answer >>
Related Articles
  1. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  2. Investing Basics

    The Working Capital Position

    Learn how to correctly analyze a company's liquidity and beat the average investor.
  3. Fundamental Analysis

    Taking Stock Of Discounted Cash Flow

    Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
  4. Investing Basics

    Explaining the Spot Rate

    The spot rate is the immediate purchase price posted on exchanges for purchasing commodities, currency and securities.
  5. Chart Advisor

    Bullish Traders Are Turning To Rare Earth Metals

    Companies that explore and or process rare metals are of specific interest to traders because of strong moves in a couple of the sector’s key players.
  6. Mutual Funds & ETFs

    The Top 3 Silver ETFs

    Like any tradable asset, silver and silver ETF prices are governed by the fundamental market economic forces of supply and demand.
  7. Chart Advisor

    Watch Out For Falling Copper Prices

    Commodity traders have been turning their attention toward copper prices over the past several weeks.
  8. Economics

    Ending The Limits On U.S. Crude Oil Exports

    As US storage capacity reaches its limit, industry participants and their lobby groups in Washington are calling for an end to the crude oil exports ban.
  9. Mutual Funds & ETFs

    Prospects of Gold ETFs GDX vs. GDXJ

    Eyeing gold? A comparison of the prospects of the Market Vectors Gold Miners and Market Vectors Junior Gold Miners ETFs.
  10. Chart Advisor

    5 Charts That Suggest Gold Stocks Are Headed Lower

    The spot price of gold has been trading within a consistent downtrend.

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center