Vendor finance is a powerful tool to have in your sales arsenal. Not only can it help you overcome key barriers and close more sales, it also helps build stronger business relationships with your clients. Vendor finance comes into its own if you sell high value services, or products where cost and cash flow are a key concern for your customers; it helps your sales team overcome this objection without your customers needing to secure a bank loan or deposit the business’ assets as collateral.
But what exactly is vendor finance? In this article we’ll explain what vendor finance is, how you can use it to secure more sales, and how it can enable you to help your clients grow their businesses faster.
Vendor finance is also known as partner finance, “dealer finance”, “supplier finance”, and “supply chain finance”. It is an arrangement in which a financing company partners with an equipment provider or professional service provider, to offer financing options to the company’s clients in order to aid the purchase of their specific products or services.
Vendor finance can benefit the customer by making the purchase of equipment or business loan affordable and accessible. The financing options offered through the equipment provider may be more tailored to the customer's needs and may offer more flexible terms than traditional financing options.
A vendor is a person or company that sells goods or services to another client or company. Vendors can range between a small business, large corporation, or even an individual. It is usually required for business-to-business transactions or supply chains. At Union Business Finance, we specialise in providing partner finance within the business-to-business (B2B) sector.
Vendor finance is really simple and works as follows:
Debt Vendor Financing occurs when the client or business agrees to borrow the finance payment to purchase the goods or services they may need, with interest included. This can be paid off over a certain period of time.
If this payment is not successful, it results in the dismissal of any future financial arrangements, and a bad debt write off.
Equity Vendor Financing is the process of the client offering an amount of its own company’s shares in exchange for the goods or services it requires from the vendor; rather than using financial payments. Ultimately, the vendor then becomes a shareholder of the client’s business, additionally having a small amount of control in further business decisions.
This method of financing is common for small and start-up businesses.
The advantages of vendor finance can benefit both the vendor, and customer needing to borrow the financial services.
Advantages for the vendor include:
Advantages for the customer include:
Mostly, disadvantages of vendor financing fall towards the end user (customer). The reasons why disadvantages could occur are:
A vendor note is a type of supplier finance. It is a financial agreement for the customer to pay the vendor for the product or goods received over a short period of time. This is particularly good for smaller businesses, who require goods or a product swiftly, but do not have the current funds to pay straight away.
Nothing! Ultimately it is an introduction between a customer and vendor. At Union Business Finance, we can help you find the best funding if you are looking for partner finance to boost your business growth and sales revenue.
Increase your sales conversions today with our Partner Finance Solutions.