Self liquidating asset
A business might use a self-liquidating loan (or assets) to purchase extra inventory in anticipation of the holiday shopping season.
The revenue generated from selling that inventory would be used to repay the loan.
Because the building could be leased out to tenants and generate a regular income, it has the inherent ability to eventually pay off the total cost of the original building project.
In like manner, the toll bridge would eventually generate enough revenue to offset the initial investment.
From that point forward, both projects would be able to remain self-sustaining and even earn additional profits that could be used to fund other municipal projects.
It refers to a loan that is used to generate proceeds that are in turn used to repay the loan.
There are a number of examples of this type of investment activity, ranging from municipal projects to real estate.
One example of a self-liquidating asset would be the construction of a building or toll bridge for use in a city or town.
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