Vendor Financing


DEFINITION of 'Vendor Financing'

The lending of money by a company to one of its customers so that the customer can buy products from it. By doing this, the company increases its sales even though it is basically buying its own products.

BREAKING DOWN 'Vendor Financing'

This is a sneaky method a company can use to increase sales. It is also very risky, as the companies it lends money to are usually not very financially stable and may never pay back the money. If they don't pay back the debt, the lending company will just write-down the loss as a bad debt.

  1. Voodoo Accounting

    Creative rather than conservative accounting practices. Voodoo ...
  2. Volume Discount

    A financial incentive for individuals or businesses that purchase ...
  3. Time-Sale Financing

    A form of indirect dealer lending or financing used by banks ...
  4. Floor Planning

    A form of financing pertaining specifically to inventory. A lender ...
  5. Vendor Note

    A type of debt instrument used in a particular type of short-term ...
  6. Bad Debt

    A debt that is not collectible and therefore worthless to the ...
Related Articles
  1. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  2. Active Trading Fundamentals

    Evaluating A Company's Management

    Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
  3. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  4. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  5. Investing

    How To Create a Winning Elevator Pitch

    Whether you are talking to potential investors, partners, customers or employees, the skill of being able to concisely summarize your business is critical.
  6. Professionals

    Hard and Soft Due Diligence: What's the Difference?

    Learn about the differences between "hard" and "soft" due diligence in a mergers and acquisitions deal (M&A) and why soft diligence is increasingly important.
  7. Active Trading Fundamentals

    How Does Fundera Work and Make Money?

    Learn more about Fundera, the online loan broker service agency, and discover what it offers and how it makes money through its service.
  8. Economics

    What Does a Relationship Manager Do?

    A firm’s relationship manager works to maintain positive relationships with its customers and partner firms.
  9. Economics

    What's Involved in Quality Management?

    Essentially, quality management entails overseeing all activities and tasks needed to maintain excellence.
  10. Stock Analysis

    Salesforce and SAP: Don’t Expect the Same From Both

    Take a look at the similarities and differences between SAP and Salesforce in the customer relationship management (CRM) software marketplace.
  1. How are joint ventures regulated in the United States?

    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  2. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  3. How do a corporation's shareholders influence its Board of Directors?

    The 21st century has seen a rapid increase in shareholder activism, such as the general awareness, involvement and influence ... Read Full Answer >>
  4. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>
  5. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  6. What are some types of financial netting?

    Whenever two parties in any financial relationship square up or consolidate their accounts with one another, it is called ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!