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ASSET-BASED FINANCING

asset-based financing. See FINANCING.


FINANCING
financing,n.1. The act or process of raising or providing funds. 2. Funds that are raised or
provided. finance,vb.
asset-based financing. A method of lending in which lenders and investors look primarily to
the cash flow from a particular asset for repayment.
construction financing. See interim financing.
debt financing. The raising of funds by issuing bonds or notes or by borrowing from a
financial institution.
equity financing. 1. The raising of funds by issuing capital securities (shares in the business)
rather than making loans or selling bonds. 2. The capital so raised.
floor-plan financing. A loan that is secured by merchandise and paid off as the goods are sold.
Usu. such a loan is given by a manufacturer to a retailer or other dealer (as a car dealer). Also
termed floor planning. Cf. FIELD WAREHOUSING.
gap financing.Interim financing used to fund the difference between a current loan and a loan
to be received in the future, esp. between two long-term loans. See bridge loan under LOAN.
interim financing. A short-term loan secured to cover certain major expenditures, such as
construction costs, until permanent financing is obtained. Also termed construction financing.
internal financing. A funding method using funds generated through the company's operations
rather than from stock issues or bank loans.
link financing.The obtaining of credit by depositing funds in another's bank account to aid the
other in obtaining a loan.
outside financing.The raising of funds by selling stocks (equity financing) or bonds (debt
financing).
permanent financing.A long-term loan obtained to repay an interim loan, such as a mortgage
loan that is used to repay a construction loan.
project financing. A method of funding in which the lender looks primarily to the money
generated by a single project as security for the loan. This type of financing is usu. used for large,
complex, and expensive single-purpose projects such as power plants, chemical-processing plants,
mines, and toll roads. The lender is usu. paid solely or primarily from the money generated by the
contracts for the facility's output (sometimes paid by customers directly into an account
maintained by the lender), such as the electricity sold by a power plant. The lender usu. requires
the facility to be developed and owned by a special-purpose entity (sometimes called a
bankruptcy-remote entity), which can be a corporation, limited partnership, or other legal entity,
that is permitted to perform no function other than developing, owning, and operating the facility.
See SINGLE-PURPOSE PROJECT; SPECIAL-PURPOSE ENTITY; BANKRUPTCY-REMOTE
ENTITY.
SPECIAL-PURPOSE ENTITY

special-purpose entity.A business established to perform no function other than to develop,


own, and operate a large, complex project (usu. called a single-purpose project), esp. so as to limit
the number of creditors claiming against the project. A special-purpose entity provides additional
protection for project lenders, which are usu. paid only out of the money generated by the entity's
business, because there will be fewer competing claims for that money and because the entity will
be less likely to be forced into bankruptcy. A special-purpose entity will sometimes issue securities
instead of just receiving a direct loan. Abbr. SPE. Also termed special-purpose vehicle
(SPV). See BANKRUPTCY-REMOTE ENTITY; SINGLE-PURPOSE PROJECT ; project
financing under FINANCING.
SPECIAL-PURPOSE PROPERTY
special-purpose property.See PROPERTY.
SPECIAL-PURPOSE VEHICLE
special-purpose vehicle.See SPECIAL-PURPOSE ENTITY.
BANKRUPTCY-REMOTE ENTITY
bankruptcy-remote entity.A business entity formed in a manner designed to minimize the risk
of becoming a debtor in a bankruptcy case. The entity's organizational charter usu. requires at
least one independent director to be appointed, as well as a unanimous vote by the entity's
directors, before a bankruptcy petition may be filed. The business is usu. a special-purpose entity
established to perform limited functions, such as to purchase and hold accounts receivable or other
financial assets that generate revenue. It also has only one or a few primary creditors, to reduce the
likelihood of an involuntary bankruptcy. A bankruptcy-remote entity will sometimes issue
securities instead of receiving a loan from a financial institution. See SINGLE-PURPOSE
bar examiner.One appointed by the state to test applicants (usu. law-school graduates) by
preparing, administering, and grading the bar examination. [Cases: Attorney and Client 6. C.J.S.
Attorney and Client 18.]
BANKRUPTCY-REMOTE ENTITY
bankruptcy-remote entity. A business entity formed in a manner designed to minimize the risk
of becoming a debtor in a bankruptcy case. The entity's organizational charter

usu.
requires at least one independent director to be appointed, as well as a
unanimous vote by the entity's directors, before a bankruptcy petition may be
filed. The business is usu. a special-purpose entity established to perform limited functions, such as to
purchase and hold accounts receivable or other financial assets that generate revenue. It also has only one or a
few primary creditors, to reduce the likelihood of an involuntary bankruptcy. A bankruptcy-remote entity
will sometimes issue securities instead of receiving a loan from a financial institution. See SINGLEPURPOSE
FINANCING STATEMENT
financing statement. A document filed in the public records to notify third parties, usu.
prospective buyers and lenders, of a secured party's security interest in goods or real property. See
UCC 9-102(a)(39). Cf. FINANCIAL STATEMENT . [Cases: Secured Transactions 92. C.J.S.
Secured Transactions 6566.]

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