Asset Conversion Loan

Your furniture business needs a loan for $14,000 to buy ten of the latest lazy chairs that your customers have been requesting. Pronto. Your bank gives you a short-term asset conversion loan for 14 grand. In exchange, you promise to sell 15 couches to a friendly store out of competitive range to pay the loan back.

Asset conversion loans are done when a business has surplus inventory, but needs cash quick. The loan is made against that inventory, and as the inventory is sold, the loan is paid off. For example, the company could offer a certain portion of inventory in exchange for the loan with an arrangement along the lines of "When it sells, the bank gets XYZ." When it sells, the business pays the bank.

If it doesn't sell, the bank can take the inventory, and also collect fees etc., because the business defaulted. A business might do this if it's seasonal business and knows it will (hopefully) sell all the inventory soon, but right now needs the cash more.