LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Type of loan

CA Krishna Chaitanya M (Chartered Accountant) (463 Points)

04 September 2012

what's the difference between loan against stock and loan against book debts

Reply
Follow
Share

2 Replies

Bhaskar Unnikrishnan CPA CMA (Accounts / Administration) (414 Points)
Replied 04 September 2012

Under book debt system, the bank allows the borrower to draw to the extent of the limit sanctioned to him provided the drawings are backed by adequate receivables.Advances solely against book debts are not common as such transactions carry many risks. The banks generally accept book debts as a collateral security or as a part of a composite security.

Bhaskar Unnikrishnan CPA CMA (Accounts / Administration) (414 Points)
Replied 04 September 2012

Under stock based loan, Investors who need cash—or who want to tap the value of their portfolios without selling their investments—might be tempted to apply for a “stock-based loan,” pledging fully paid securities as collateral for the loan from Financial Institutions. For better clarification, please mention you meant stock based loan or Loan against Inventory Stock. The later is different. The borrower plege their inventory to lender for short term financing. There are two types: blanket inventory liens or field warehousing i.e. inventory stay with borrower or lender may take possession of inventory.