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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Vendor finance (vendor loan)

What is vendor finance in a business sale, and where does it rank?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Vendor finance is part of a business's sale price that the seller lends to the buyer instead of receiving it in cash at completion, repaid over an agreed period, usually with interest. It closes a gap between what the buyer can raise and what the seller will accept, and a seller willing to wait is some evidence that it believes the forecasts. A bank funding the same purchase usually requires the vendor loan to be subordinated, with payments allowed only while the bank's covenants are met and blocked on default, and, even if it counts the loan as equity, reads the repayments as debt service the business must meet.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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FACILITIES AND THEIR SHAPE

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