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Wet Loan

Wet Loan, or Cost Over Run Loan, is a type of loan used to finance a project or company that requires funds beyond the amounts already available. It is usually a short-term loan secured on current assets, such as receivables, inventory and other liquid assets. Wet loans are sometimes referred to as "bridge loans" and are often required when a project cannot yet generate enough of its own revenue.

The funds from a Wet Loan are often used to cover capital costs, such as the purchase raw materials, hiring of labour, and the purchase of other equipment needed to complete a project. Wet Loans are also useful for businesses that require extra cash in order to purchase inventory, pay off debts, and even finance new products or services.

The terms of a Wet Loan will vary based on the maturity of the loan, the lender's preferences, and the borrower's creditworthiness. Generally, borrowers must secure the loan with collateral, and a number of lenders will also require a personal guarantee.

Wet Loans can be a good way for companies to obtain short-term financing in order to accomplish their goals, especially if they are not eligible for traditional bank financing. The interest rates associated with wet loans may be higher than conventional loans but they can also be a viable option to businesses that need financing quickly or have low credit scores.

Additionally, wet loans often come with flexibility in repayment terms and can be used to fund projects until their revenues reach the point where they can support additional loan arrangements. This makes it a great solution for businesses that are still in the initial phase of develop and require capital for launching new products or services to meet customer demand.

Despite its beneficial aspects, Wet Loans also comes with significant risks and must be approached with caution. Careful consideration must be given to the terms of the loan, the ability to payback the loan, and the risks associated with the project.

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