Vendor Financing

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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.

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