Trust Receipt
Document letting an importer take goods for resale while funds are owed to the bank.
Detailed Description
Trust Receipt
What is a trust receipt?
A trust receipt is a financial document that allows a borrower to take possession of goods while the lender retains ownership until the loan is repaid.
What are the primary benefits of using a trust receipt?
Trust receipts offer liquidity, flexibility, risk mitigation for lenders, and facilitate international trade.
What are the key components included in a trust receipt?
Key components include parties involved, description of goods, loan amount, repayment terms, and rights and obligations.
What risks are associated with trust receipts?
Risks include default risk, market risk, legal complications, and challenges in inventory management.
How do trust receipts differ from other financial instruments?
Trust receipts focus on the possession and use of goods, while letters of credit ensure payment and bank guarantees promise to cover obligations.