Basically, a borrower takes out a loan that is used to finance business activities that generate revenue.Then the borrower takes the revenue generated from those business activities and uses it to repay the money that was borrowed to finance the activities.Reforms to help consumers have been suggested, and the Consumer Financial Protection Bureau is expected to propose new regulations.[4] But there will always be financially distressed consumers who need help to engage in the legal process.

For example, they do not make sense for fixed assets, such as real estate, or depreciable assets, such as machinery.

There are also a number of scams that call themselves "self-liquidating loans".

Little empirical evidence exists to answer such questions.

Court observations have long suggested that unrepresented individuals have trouble making use of self-help materials.

At this point, the company will have generated profits from the busy season, and will now be able to use those profits to repay the loans it took out to finance operations during the busy season.

And this is essentially what is called a self-liquidating loan. “Analysis for Financial Management”, Mc Graw-Hill Irwin, New York, NY, 2007.Debt Ratio Analysis Debt Service Coverage Ratio (DSCR) The term “self-liquidating loans” is banker slang.It refers to a loan that is used to generate proceeds that are in turn used to repay the loan.Two decades ago, one author related the story of a tenant who received limited advice from a legal aid lawyer and fully accessible self-help legal materials before her eviction hearing.She came to the proceeding armed with damning photographic evidence of problems in her apartment and with knowledge of favorable law.During a hallway negotiation, she failed to produce the evidence she had in hand or to raise the legal defenses she knew about.