Trust receipt

A trust receipt is a legal document, stating that a borrower of funds has physical possession of certain property that is held in trust for the lender. Under this arrangement, the lender retains title to the underlying assets until the borrower pays back a designated debt to the lender. Upon repayment of the loan, the borrower gains title to the underlying assets. Trust receipts are commonly used by distributors and dealers that sell expensive goods; they obtain the inventory under trust receipt arrangements with their lenders and then pay back the lenders as the inventory is sold. Trust receipt arrangements are classified as asset-based lending.