Lender control over borrower use of pledged inventory is greatest under which of the following financing arrangements?
A)Warehouse receipts
B)Floating lien
C)Trust receipts
D)Lender control is equal under all of the above.

Question

Quizplus · Accepted Answer

The lender control over borrower use of pledged inventory is greatest under the financing arrangement of warehouse receipts. This is because warehouse receipts require borrowers to physically deliver the inventory to a third-party warehouse that will store and safeguard the goods until the loan is repaid. The borrower is unable to access or sell the inventory without the lender's permission or the repayment of the loan. This provides the lender with the greatest level of control and security over the pledged collateral.

Lender Control Over Borrower Use of Pledged Inventory Is Greatest