May 112018
 

Vendor finance is a creative way for a firm to fight falling sales. If a customer cannot afford to pay up front, it borrows the funds from the manufacturer. Turnover goes up, of course. But there’s a second win. Say a business has £10 of stock at the start of the year, buys £100 during the year and ends up with £20 unsold. The ‘cost of goods sold’ expense is £90 (10+100-20). However, if the closing stock is valued at £40, thanks to a recent vendor-financed order at a higher selling price, then the expense falls to £70 (10+100-40). But there’s a big risk – anyone needing a loan from a supplier to fund purchases could well be in dire financial straits, so there’s a danger the loan will have to be written off.

We have thousands of other terms listed on BankingGlossary.co.uk and are rapidly becoming the authoritative source on all investment and banking related definitions and terms. I hope that my definition has helped you understand Vendor finance.

If you are interested in finding out more on investment explanations such as Vendor finance then please sign up for the ‘Word of the Day’ email. You will receive one definition in your mailbox each morning. Its a great way to learn some new terms which will really help you be an all-round expert at work.

Example of Vendor finance in use?

Can you provide an example of ‘Vendor finance’? If so you could win 100 GBP of Amazon vouchers. Please comment below and one person will be selected at random on [date]. Thank-you

 Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

(required)

(required)