Self liquidating asset implies that

See Also: Loan Agreement Collateralized Debt Obligations When is an interest rate not as important in selecting a loan?Debt Ratio Analysis Debt Service Coverage Ratio (DSCR) The term “self-liquidating loans” is banker slang.It refers to a loan that is used to generate proceeds that are in turn used to repay the loan.Basically, a borrower takes out a loan that is used to finance business activities that generate revenue.A business might use a self-liquidating loan 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.

For example, they do not make sense for fixed assets, such as real estate, or depreciable assets, such as machinery.During the busy season when business is booming the company needs to borrow money to finance short-term assets such as inventory and accounts receivable.The company borrows money to buy more materials to take advantage of the increasing demand of the busy season.There are also a number of scams that call themselves "self-liquidating loans".

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