Loan Against Commodities
Loan against commodity is a unique way of getting some capital when the chips are down. The basic principle of financing applied by the commodity Loan Companies is the underlying asset/ commodity which is being taken as collateral. When you take the loan against commodity, there is no restriction on location, commodity or quality which is being financed. Financing is available for most of the commodities across the country. One can also apply for Loan against warehouse. One has to have a warehouse receipt.
Warehouse Receipt is. It is a document stating the ownership of the goods kept in the warehouse. It is issued by the Warehouse to individuals (could be partnerships or Pvt. Limited companies as well) who have deposited their goods at the Warehouse. There are two types of receipts provided by the issuer. These could be Negotiable Warehouse Receipts or Non-negotiable Receipts. The latter, non-negotiable receipts cannot be transferred from one person to another (can’t change hands). Usually the purpose of such loans is to provide liquidity to farmers or traders either to prevent the farmers from making a distressed sale of their product at the time of low prices. As for the traders, it is provided for the purchase of raw materials for the Food and Agro Processing Industries during the harvesting season and mostly when the prices are low.