Vendor Financing
Vendor financing is a type of financing when a supplier credits his buyer in order to improve sale. By landing the money to his buyer, supplier will stimulate sale and earn interest, but will also put him self in a risky position since most vendor are not able to conduct credit analysis.
Since buyer who is not creditworthy is not able to borrow money from another financial institution, there is no guarantee that he will pay back to the vendor. In that case, vendor will write the loss as a bad debt, but it is still the loss. Large buyers will almost never engage this type of financing, because they are able to borrow money at lower rates from financial institutions.
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