Trust receipt,
Definition of Trust receipt:
A trust receipt is a notice of the release of merchandise to a buyer from a bank, with the bank retaining the ownership title of the released assets. In an arrangement involving a trust receipt, the bank remains the owner of the merchandise, but the buyer is allowed to hold the merchandise in trust for the bank, for manufacturing or sales purposes.
Documentary credit: Method whereby a bank allows an importer to take delivery of imported goods but retains the title to them. This arrangement allows the importer to acquire and sell goods without making payment under a letter of credit.
Asset based financing: Method used for funding purchase of inventories of consumer durables (appliances, automobiles), construction equipment, etc. In this arrangement the bank holds the title and the borrower can sell the goods (and thus repay the loan) but is obligated to keep them separate from the other inventory.
A trust receipt is a financial document attended to by a bank and a business that has received delivery of goods but cannot pay for the purchase until after the inventory is sold. In most cases, the company's cash flow and working capital may be tied up in other projects and business operations.
How to use Trust receipt in a sentence?
- The trust receipt serves as a promissory note to the bank that the loan amount will be repaid upon sale of the goods.
- A trust receipt is a notice of the release of merchandise to a buyer from a bank, with the bank retaining the ownership title of the released assets.
- In an arrangement involving a trust receipt, the bank remains the owner of the merchandise, but the buyer is allowed to hold the merchandise in trust for the bank, for manufacturing or sales purposes.
Meaning of Trust receipt & Trust receipt Definition
