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Then when business slows down the company will have less of a need for borrowed funds to finance short-term assets like inventory accounts – the need for financing will decline as the need for inventory declines.
At this point, the company will have generated profits from the busy season, and will now be able to use those profits to repay the loans it took out to finance operations during the busy season.
Self-liquidating loans are not always a good credit choice.
These loans are intended to finance purchases that will quickly and reliably generate cash.
A business might use a self-liquidating loan to purchase extra inventory in anticipation of the holiday shopping season.
Debt may also be issued by community improvement districts created by local law and by various state and local authorities and similar entities. Unless another form of financing is specifically authorized and qualified for, a Local Government can issue only its general obligation (“G. A general obligation can be issued for any purpose for which ad valorem taxes may be levied.
General obligations cannot be issued without the assent of a majority of the qualified voters of the Local Government voting in a referendum held for that purpose.