What is the financing of the supplier?

The financing of the supplier is a loan arrangement that occurs between the company and the seller, which the company supplies a large amount of product. This arrangement differs from expanding the credit line, in this financing of the supplier involves determining the specific amount that will be borrowed, as conditions related to the repayment of the loan within the specified time period. The financing of dealers is not unusual in situations where there is a strong work relationship between the customer and the seller.

Sellers may decide to expand the supplier's financing offer as a means to increase the sales of the company. Extension of the weighted customer loan helps ensure that the bottom line looks very good for the period in which the loan amount is used for shopping. At the same time, the supplier's financing will include a certain type of interest rate for loans. This also means that the seller also creates an interest income flow.

For the customer, the use of a supplier's financing can be a way to get a productionThose that are necessary for operation, but it is difficult to obtain them due to current problems with cash flows. If this is the case, the offer of financing the seller is often very welcome. However, the customer should accept the offer only after investigating other funding for purchases. The financing of retailers often includes an interest rate that is higher than most of the commercial loans. There is also a chance that going with the supplier's funding will increase the company's risk profile depending on the amount and conditions of the loan.

In some cases, the seller may decide to give up any type of payments on the outstanding balance of the supplier's financing. Instead, the seller may decide to accept the interest in the company instead. Although it is rarely a control interest, it is important that the customer consider options with great care before the offer.