Vendor Financing

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. Cook The Books

    A buzzword describing fraudulent activities performed by corporations ...
RELATED FAQS
  1. What content does a letter intent have to have?

    Letters of intent vary in purpose and content depending on the dealings between the involved parties. In a basic form, each ... Read Full Answer >>
  2. What is the difference between a letter of intent and a memorandum of understanding?

    A letter of intent is likely to encompass a number of different aspects, and it varies in length according to the level of ... Read Full Answer >>
  3. What are the most effective ways to reduce moral hazard?

    There are a number of ways to reduce moral hazard, including the offering of incentives, policies to prevent immoral behavior ... Read Full Answer >>
  4. How legally binding is a letter of intent?

    A signatory may be bound to a letter of intent depending on how the letter is drafted. In a business-to-business transaction, ... Read Full Answer >>
  5. How can a company resist a hostile takeover?

    Several different defense strategies can be applied by existing corporate boards to ward off a hostile takeover. The most ... Read Full Answer >>
  6. Are there any regulations on transfer pricing?

    The United States, like many nations, imposes some restrictions and regulations on transfer pricing. Tax treatment of transfer ... Read Full Answer >>
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. Options & Futures

    Advanced Financial Statement Analysis

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

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  5. Economics

    Gas Dispute Poses Risks For Both The EU And Russia

    The Russia-Ukraine gas dispute has caused energy insecurity for the EU, which is seeking new gas suppliers, and market uncertainty for Russia's Gazprom.
  6. Investing

    What is Debt Financing?

    When a company needs to pay for something, it can pay with cash, or it may finance the purchase. Financing means that it gets the money from other businesses or sources, in return for obligations. ...
  7. Investing

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...
  8. Investing

    Who are Stakeholders?

    “Stakeholder” is used in commerce to describe any party who has an interest in a business or enterprise. Traditionally, stakeholders in a corporation are shareholders, employees, customers and ...
  9. Professionals

    What are Fringe Benefits?

    Fringe benefits are non-monetary compensation employers give to employees. They are often associated with high priced perks given to top executives, but any employee can receive them. Fringe ...
  10. Investing

    What's a Subsidiary?

    A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by ...

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center