Short-term asset-based loans generally get paid off as accounts receivable and inventory liquidate.

In growing businesses, however, more accounts receivable and inventory are being generated all the time.

Thus “commercial bank investment policy emerges from a straight forward application of the theory of portfolio management to the particular circumstances of commercial bank.” Portfolio management refers to the prudent management of a bank’s assets and liabilities in order to seek some optimum combination of income or profit, liquidity, and safety.Repaying capacity, is therefore, worked out as a residual after meeting the requirements of the family consumption and payment of other dues, debts and repayments.In case of non-liquidating or partially liquidating loans, the resource acquired with the funds are not directly consumer or are consumed over a number of years.Read this article to learn about the portfolio management of a commercial bank: objectives and theories: The main aim of a commercial bank is to seek profit like any other institution.Its capacity to earn profit depends upon its investment policy.If there's easily recognizable value somewhere, anywhere, in your business, you can generally get a loan against it to help fund the growth of your company.This is the fundamental idea behind so-called asset-based loans--a potent source of funding for established small businesses, according to William Barnett, an attorney with the law firm Herrick, Feinstein LLP in New York City who specializes in asset-based lending.