Is Vendor Finance a Good Option?

1. Is Vendor Finance a Good Idea? helps in establishing a credit reputation

3. Vendor Financing • Vendor financing is mostly used in private equity and came to its peak during the great recession when the cash in the trade market was very low due to difficulty in procuring credits during those harsh days. • To tackle this problem many private equity firms began financing their own buyouts in order to prevent the buyer from borrowing money from banks which seemed to be quite difficult during that time. • They would lend the money to the buyers from their own accounts and thus help in maintaining the leverage ratios.

4. Vendor Financing • Vendor Financing is the lending of money by a business to a customer who then uses that money to buy vendors goods and services. • Also known as a trade credit this process may also involve the transfer of shares of the company borrowing the money to the company lending the money. • It is kind of loan in which the lender gets a higher benefit as compared to keeping that money in the banks. • Vendor financing comes into use when traditional institutions fail to realize the financial needs of a potential business.

5. Payable Financing • It helps in the purchase of essential goods and services by the buyer without getting involved in any kinds of loan or offering any kind of collateral for the same. • These kinds of Payable Financingultimately helps in establishing a credit reputation of a business and helps in future bank finances. • when it is actually important for a business for procuring working capitalwhich helps in increasing the revenue. This arrangement is beneficial for both the borrower and the lender.

6. Borrower’s Point Of View • From the borrower’s point of view this is beneficial because he does not have to get involved in the hassle of arranging money to buy the vendors assets. • It saves the interest amount that the borrower has to pay if it would have opted for a financial institution borrowing. The interest is the biggest saving here for the borrower.

7. Lender’s Point Of View • From the lender’s point of view which is the private equity firm, in this case, it is important that someone buys their assets so that they are able to maintain a proper return for their investors. • When there are no buyers the pressure from the investors increases and it becomes really difficult to cope with the situation. • They find it better to finance their own buyouts in order to maintain their relationship with the investors.

8. Priority Vendor • It has proved to be beneficial for the small equity businesses in the past few years.  • Priority vendor is one of the most renowned names in vendor financing in India which has helped many small businesses in a smoother workflow. • It also provides services like supplier financeto its clients.