A supplier’s comment is a short-term loan that a seller makes to a buyer, backed by products that the buyer buys from the supplier.
This type of transaction is called a deferred loan and is often used when a company cannot borrow the required amount of capital from more traditional lenders.
These types of loans often have a higher default rate than those offered by most banks and therefore offer a higher interest rate to compensate providers for the risk of default on these loans.
Supplier promissory notes loans are often secured by inventory being sold to a buyer, but can also be secured by the buyer’s business assets or cash flows.
Vendors’ promissory notes vary in length to maturity, but typically take three to five years to fully repay.