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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Collateral Trust Bonds

Definition:

When a company takes shares they own of another company, tosses them in an escrow account, and uses those stocks as collateral for raising money.

Example

Let's say you own a company that makes hair-removal products and you stumble across a formula guaranteed to get rid of knuckle hair forever. (Just think of all those hairy dudes and grannies you could help!) Only one little hiccup: you need cash to make and market the product.

Your company owns Apple stock. So you throw the Apple stock into an escrow account and go to the bank. The bank uses the stock as collateral to give you a loan. Now you have the cash for your new product. Ta-da!