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Financing The Dealer's Inventory, Robert G. Lawson

Law Faculty Scholarly Articles

The principle objective of inventory financing is to provide the dealer with a line of credit to carry on his business. To achieve this objective, it is necessary that the dealer have power to sell the collateral, and to apply the proceeds to the purchase of other goods. Since a sale of the callateral by the dealer to a bona fide purchaser destroys the creditor's security interests in those goods, he obviously will not permit such disposition unless given protection in some other way. Therefore, to satisfy the demands of both the dealer and the financier, the security instrument must …