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Loan Glossary
Q. What is a Debt Service Reserve?
Answer:
This is an amount of money that a borrower sets aside to repay a loan in the event that he/she doesn't have enough money at some point to meet the minimum monthly payments. This usually applies to companies that borrow to help them expand or purchase more inventory. They use the reserve of cash in times when they do not have enough revenue coming in to meet their commitments.