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).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
8 of the best riverside properties for saleThe best riverside properties for sale – from a Grade II-listed former mill house with views over the River Chelmer in Essex, to a townhouse on a Georgian terrace overlooking the Avon Gorge in Clifton, Bristol
-
Will “Liberation Day” strike again?Donald Trump’s 90-day tariff pause comes to an end on 9 July. Can we expect further market turmoil?
