Say, you’re a biscuit manufacturer. Your main ingredient, wheat, is available at its best price and quality in April, right after harvest. But you’re not a large manufacturer, and can’t afford to pay for it upfront. You need a loan.
But what if, rather than a bank, investors gave you the loan instead?
Unlike a bank loan, this would mean that investors owned the produce until you actually wanted it, and the transaction would not show up as debt on your balance sheet. You’d also have the flexibility of buying the produce from the investors at any time within the predetermined time frame.