Dealer Financing
Dealer financing is a credit facility provided to dealers or distributors to help them purchase goods from manufacturers. It ensures that dealers have the necessary working capital to maintain inventory levels and meet demand.
How it works in detail:
• Step 1
The dealer orders products from a manufacturer. The dealer might not have enough cash on hand to pay for the entire order upfront.
• Step 2
A financial institution pays the manufacturer on behalf of the dealer, ensuring that the manufacturer is paid in full.
• Step 3
The dealer receives the goods and sells them to customers.
• Step 4
After making sales, the dealer repays the financial institution with the proceeds from the sales.
This structure helps dealers manage their cash flow, maintain stock levels, and meet customer demand without immediate payment to the manufacturer.