Vendor financing, also called vendor finance or supplier financing, lets your business pay for supplies later instead of upfront. Either your supplier gives you time to pay, or a finance provider pays the supplier for you and you repay within 30 to 90 days. Either way, you can buy inventory or raw materials without draining the cash you need to run the business.
| Vendor Financing Quick Reference | Details |
|---|---|
| What it is | A finance provider pays your supplier on your behalf, and you repay the provider within an agreed short-term period, typically 30 to 90 days. |
| Also called | Vendor finance or supplier financing. Trade credit and accounts payable financing are related terms, but the structures can differ. |
| Payment terms | Typically 30, 60, or 90 days. |
| Collateral required | No. Drip Capital's Vendor Financing is collateral-free and unsecured. |
| Approval & funding time | Drip Capital funds approved vendor payments within 24–48 hours. |
| Typical cost | Varies by provider and business. Typical market range is about 1% to 3% of the financed amount per 30 days. Use the calculator below. |
| Who uses it | Manufacturers, wholesalers, distributors, retailers, importers, and other businesses that need to manage supplier payments and working capital. |
| Minimum revenue | Requirements vary by provider. Drip Capital's US Vendor Financing is designed for businesses with $2 million or more in annual revenue. |
| Funding amount (Drip Capital) | $50,000 to $3 million. |
✓ Vendors paid within 24–48 hours, in the US or overseas
✓ Repay in 30–90 days, as your goods sell
✓ No collateral, and your supplier doesn't need to sign up to anything
What is Vendor Financing?
"Vendor financing" is used in two ways, and it helps to know which one you're looking at:
- Supplier-provided vendor financing. The vendor itself gives you credit: payment terms such as net 60, a vendor loan, or an equipment maker's financing program. In the sale of a business, the seller may even finance part of the price (a "vendor take back").
- Third-party vendor financing. A finance company pays your vendor's invoice on your behalf, and you repay the finance company later. Your supplier gets paid on time without carrying any credit risk, and you get the time you need to sell your goods.
Both solve the same problem: working capital gets tied up between paying suppliers and collecting from customers. Supplier credit depends on each supplier's willingness and capacity to wait for payment. Third-party vendor financing works even when the supplier wants cash upfront, which is exactly when most businesses need it.
An example: a US importer buys leather from a tannery in Italy that wants payment at shipment. The importer's own customers, US retailers, pay 60 days after delivery. Instead of tying up its cash for three months, the importer uses vendor financing: the provider pays the tannery, and the importer repays once the retailers pay.
How Vendor Financing Works
Third-party vendor financing, step by step:
- Get approved for a vendor financing limit based on your business's revenue and financial track record.
- Submit a supplier invoice for goods or services you are buying.
- The provider pays your supplier directly, in the US or overseas.
- Your supplier ships, and you receive, use or sell the goods.
- You repay the provider plus a fee, typically after 30, 60 or 90 days, once your own customers have paid.
Supplier credit works more simply: the supplier ships now and invoices you on agreed terms, such as net 60. The catch is that you're relying on each supplier's willingness and capacity to wait, and many suppliers, especially overseas factories, want cash upfront.
These are the payment terms US importers describe to our team most often:
- "We pay our overseas suppliers upfront through money-transfer services before the goods ship."
- "Vendors want payment in 30–45 days, but customers pay in 45–60, which leaves us a gap of about two weeks."
- "We pay overseas vendors 30–45 days after invoice, but the big chains we sell to take about 90 days to pay."
Types of Vendor Financing
Supplier trade credit: the most common form. Your supplier ships now and lets you pay on terms such as net 30, 60 or 90. It's usually unsecured and relationship-driven, and many suppliers cap how much credit they'll extend.
Equipment vendor financing: equipment makers and dealers often run financing programs (sometimes called vendor finance programs) so buyers can spread the cost of machinery or technology over months or years. These programs are tied to one vendor's products.
Seller financing (vendor take back): in the sale of a business or property, the seller lends part of the purchase price to the buyer, to be repaid over time.
Equity-based vendor financing: less common. The supplier takes an ownership stake in the buyer's business instead of immediate payment, usually in startups or strategic partnerships.
Third-party vendor financing: a finance provider pays your vendors on your behalf, and you repay within a short window. It works with any supplier, domestic or overseas, without asking them for extended terms. This is the model Drip Capital provides.
Vendor Financing Terms and Payment Structures
Common supplier terms include:
- Net 30, net 60 and net 90: pay the full invoice within 30, 60 or 90 days. Check due dates with our net 30 calculator.
- 2/10 net 30: take 2% off if you pay within 10 days, otherwise pay the full amount in 30.
- Deposit + balance: common with overseas factories, for example 30% upfront and 70% when goods are loaded.
- Cash in advance: full payment before production or shipping, typical with new suppliers.
- Late-payment penalties: interest or fees if you pay after the due date.
The tighter your supplier's terms, the bigger the gap between paying out and getting paid. That's the gap vendor financing is designed to fill. For planning around deposits, see how to plan cash for vendor deposits.
Cost of Vendor Financing
Third-party vendor financing is usually priced as a fee per 30 days on the amount financed, not as interest on a lump sum:
- Financing fee: typically about 1% to 3% of the invoice per 30 days. This is the main cost.
- Other fees: some providers add processing, wire or late fees. Ask for the full fee schedule.
- Pay only for what you use: the fee applies only to the invoices you finance, for as long as they're outstanding.
On an annual basis, 1% to 3% per 30 days is roughly 12% to 37% APR. Because most invoices are repaid in 30 to 90 days, though, the cost per invoice is usually a few percent.
The early-payment discount offset. If your supplier offers 2/10 net 30, skipping the discount effectively costs you about 37% a year. Paying early with vendor financing at 2% per 30 days (about 24% APR) to capture that discount can save money. One prospect put it this way: "If you pay my supplier on day one, could I negotiate an early-payment discount that offsets the cost?" Run your numbers:
For a deeper look at fees, see vendor financing cost and hidden fees.
Vendor Financing vs Traditional Business Loans
| Vendor financing | Traditional business loan | |
|---|---|---|
| What it funds | Specific supplier invoices | Any business purpose |
| How you get funds | Provider pays your vendor directly | Lump sum to your account |
| Repayment | 30–90 days per invoice | Fixed schedule over months or years |
| Cost basis | Fee on the amount used, for the time used | Interest on the full balance from day one |
| Collateral | Often none | Often required |
| Speed | Days, then about 24–48 hours per payment once approved | Weeks for a bank loan |
Vendor financing supports day-to-day buying. A loan suits one-off investments like equipment or expansion. For a revolving option you can use for any expense, see our business line of credit guide.
Vendor Financing vs Supply Chain Finance
Supply chain finance (also called reverse factoring) is usually set up by a large buyer. The buyer creates a program with a finance provider, which pays the buyer's suppliers early. It needs the buyer to lead the program and the suppliers to sign up.
Vendor financing for small and mid-sized businesses works on its own. You submit your supplier's invoice, the provider pays the supplier, and you repay later. There's no program to join, and nothing for your supplier to sign. For most growing businesses, that makes it the more practical option.
Also compare vendor financing vs trade credit and purchase order financing, which funds a specific customer order before you have goods to sell.
How to Choose a Vendor Financing Program
When comparing vendor financing companies and programs, check:
- Total cost on a real invoice: fee per 30 days, plus any processing, wire or late fees.
- Funding limits: can it cover your largest supplier order and your busiest season?
- Speed: how fast are suppliers paid once an invoice is submitted?
- Overseas payments: can it pay suppliers abroad, deposits and balances?
- Security: does it require collateral, a lien on your assets or a personal guarantee?
- Supplier experience: will your vendors simply get paid, or do they have to enrol?
See our side-by-side comparison of the best vendor financing companies in the US.
How to Qualify for Vendor Financing
Requirements vary by provider. Most third-party providers look for:
- A US-registered business with steady revenue. Minimums are often $1M to $2M a year.
- About 2 years of operating history
- Recent financial statements and bank statements
- Genuine supplier invoices from verifiable vendors
Drip Capital's US vendor financing is designed for businesses with $2 million or more in annual revenue. Requirements are lighter than for a bank loan: there's no real-estate collateral and no years of audited statements. See how to qualify for vendor financing.
Vendor Financing for Small Businesses
Small businesses feel the supplier-payment squeeze most: suppliers want cash upfront, banks want years of history and collateral, and every large order ties up cash. Vendor financing helps in two ways:
- Negotiate supplier credit first. Ask long-standing suppliers for net 30–60 terms. It costs nothing, but suppliers set the limits.
- Add third-party vendor financing as you grow. When orders outgrow supplier credit, or a new supplier wants cash upfront, a provider can pay the vendor while you keep your cash for operations.
What to look for: no lien on your assets, fast payment to suppliers, transparent per-invoice pricing and no minimum monthly volume.
Who Uses Vendor Financing?
Vendor financing is most valuable when suppliers must be paid well before customers pay:
- Importers: paying overseas factories and growers at shipment while goods spend weeks in transit.
- Wholesalers and distributors: buying stock upfront and selling on 60- to 90-day terms.
- Manufacturers: buying raw materials before production and sales.
- Consumer brands: funding inventory ahead of retail and e-commerce demand.
Results from Drip vendor financing customers:
| Drip vendor financing customer | What they finance | Result |
|---|---|---|
| Bulk spice & ingredient importer from New York | Purchases from growers in 7 sourcing countries; $23.4M in invoices funded since 2020 | Revenue up from $4.1M to $6.8M in three years |
| Surveying-equipment importer from New Jersey | A $2M working capital facility; 550 invoices financed since 2021 | Revenue doubled in a year |
| Flexible-packaging manufacturer from New York | Material purchases on a roughly 9% gross margin | Revenue up 134% from 2024 to 2025 |
| South Asian grocery importer from California | Upfront payments to overseas vendors, despite a short credit history | Revenue up from $1.5M to $7.6M in under two years |
"In our business you pay growers around the world long before your customers pay you. Drip Capital gave us the working capital, and the speed, to keep buying across every sourcing country without missing a beat." Founder, bulk spice importer from New York
"When our vendors needed paying before our own customers paid us, Drip Capital covered that gap quickly and reliably, even through tariff swings. That working capital let us keep importing and grow without giving up equity." CFO, surveying-equipment importer from New Jersey
When Should a Business Consider Vendor Financing?
- A supplier wants payment upfront or at shipment, but customers pay 30–90 days later.
- A large order or seasonal build needs more inventory than your cash can cover.
- A supplier offers an early-payment discount you can't afford to take.
- You're starting with a new supplier that won't extend credit yet.
- Customers are slow to pay and supplier bills keep coming. See how slow vendor payments hurt cash flow.
When it's not the right tool: long-term investments such as buildings or major equipment, or a business that is losing money on every order. Vendor financing fixes timing, not margins.
Frequently Asked Questions About Vendor Financing
What is vendor financing in simple terms?
Vendor financing means paying for supplies later instead of upfront. Either the supplier gives you time to pay (supplier credit), or a finance provider pays the supplier for you and you repay the provider within an agreed window, usually 30 to 90 days.
How does vendor financing work?
With third-party vendor financing, you send the provider your supplier's invoice, the provider pays the supplier directly, and you repay the provider plus a fee after 30, 60 or 90 days, typically once your goods have sold. With supplier credit, the supplier ships now and lets you pay on agreed terms such as net 60.
What is a vendor take back?
A vendor take back (VTB) is seller financing in the sale of a business or property: the seller accepts part of the price as a loan to the buyer, repaid over time. It is a different use of the term from vendor financing for supplier payments.
What are vendor payment terms?
Vendor payment terms set when and how you pay a supplier, for example net 30 (pay within 30 days), 2/10 net 30 (2% off if paid within 10 days), or a deposit upfront with the balance before shipping.
How much does vendor financing cost?
Third-party vendor financing typically costs about 1% to 3% of the financed amount per 30 days. On a $100,000 invoice financed for 60 days at 2% per 30 days, the fee is $4,000. If paying early earns a supplier discount, that discount offsets part or all of the cost.
Does vendor financing require collateral?
Not always. Supplier credit is usually unsecured, and many third-party providers, including Drip Capital, offer vendor financing with no collateral.
Is vendor financing the same as trade credit?
They overlap. Trade credit is credit your supplier extends to you directly. Third-party vendor financing gives you the same effect, more time to pay, but a finance provider pays the supplier instead of the supplier carrying the risk.
What is the difference between vendor financing and supply chain finance?
Supply chain finance is usually a program set up by a large buyer for all of its suppliers. Vendor financing for small and mid-sized buyers works on its own: you submit invoices and the provider pays your vendors, with no supplier enrolment needed.
Will my supplier know I am using vendor financing?
Your supplier simply receives payment for its invoice. With third-party vendor financing, the supplier does not need to join a program or change its terms.
Can vendor financing pay overseas suppliers?
Yes. Importers commonly use vendor financing to pay factories and growers abroad at or before shipment. One Drip customer, a spice importer from New York, finances purchases from seven sourcing countries.
What expenses can vendor financing cover?
It can cover raw materials, finished goods, contract manufacturing, packaging, freight and other legitimate supplier invoices for goods or services your business buys.
Can a small business use vendor financing?
Yes. Supplier credit is available to businesses of most sizes, and third-party providers set their own revenue and time-in-business minimums. Drip Capital's US vendor financing is designed for businesses with $2 million or more in annual revenue.
What happens if I miss a repayment?
Most providers charge late fees and may limit future funding. Review the late-payment terms in your agreement before signing, and talk to your provider early if a customer payment is delayed.
How Drip Capital Can Help
Drip Capital pays your suppliers directly, so you can buy more inventory without draining the cash that keeps your business running:
- Funding from $50,000 to $3 million
- Vendors paid within 24–48 hours, in the US or overseas
- Repayment in 30–90 days
- No collateral required
- Nothing for your supplier to sign up to
With over $9 billion in trade transactions facilitated and more than 11,000 businesses served globally, Drip Capital has helped importers, distributors and manufacturers grow without giving up equity.
Check your eligibility or call +1 (650) 437-0150 to talk to our team.
Related guides: Vendor financing cost · How to qualify for vendor financing · Vendor financing for inventory purchases · Vendor financing vs trade credit · Best vendor financing companies · Vendor notes
