Vendor finance

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Trade finance - intermediation.

An arrangement between a large creditworthy trade customer, a smaller less creditworthy supplier (vendor), and a bank.

The vendor discounts the invoices of its large creditworthy customer with the bank, with the knowledge and agreement of the customer.

The customer pays the bank on the normal due date of the invoices.

The rate of discount charged by the bank will be more favourable for the supplier/vendor than could normally be achieved by the supplier on their own.

See also