Vendor finance

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.

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.

Recommended

Which house-price index is the best?
Property

Which house-price index is the best?

Britain is obsessed with house prices, and we have at least four house-price indices to choose from to measure the rate of increase in the value of ou…
1 Dec 2022
House prices expected to fall by 5% in 2023
House prices

House prices expected to fall by 5% in 2023

House prices could fall by 5% next year as rising mortgage rates weigh on buyer demand.
30 Nov 2022
Is now a good time to buy a house?
Property

Is now a good time to buy a house?

Is now a good time to buy a house? That’s something many people might be asking as house prices start to show their first monthly decline since July 2…
29 Nov 2022
Are house prices in London starting to fall?
House prices

Are house prices in London starting to fall?

The property market boom seems to be coming to an end as house price growth beings to slow, but are London prices falling?
23 Nov 2022

Most Popular

Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Best regular savings accounts – December 2022
Savings

Best regular savings accounts – December 2022

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
1 Dec 2022
2 investment trusts with growing dividends: which one should you invest in?
Investment trusts

2 investment trusts with growing dividends: which one should you invest in?

They might not have spectacular yields but these two trusts have increased their dividend every year for 55 years.
24 Nov 2022