What is Buyers Credit?
 

Buyers Credit is a short-term credit in the form of foreign currency that is availed by importers against a bank guarantee to finance their imports in India. A letter of undertaking is generally issued by the importer's bank in the favor of the lending bank, which promises to pay the lending bank in case the importer fails to pay the bank. The cost of the credit is ascertained by the cost of funds for the bank.

 
 



BENEFITS OF AVAILING BUYERS CREDIT TO THE IMPORTER

The importer is able to pay the exporter on the due date, while he is able to get extended credit terms to pay the bank that is lending the Buyers Credit.

The importer can deal with the exporter on sight basis, negotiate better discount and still pay the Buyers Credit lender over an extended period of time

He can opt for payment in any foreign currency, depending on the requirement

 

The importer can use this financing for any form of trade viz. open account, collections, or LCs.

 

Since the currency of imports can be different from the funding currency, importers can take a favorable view of any one particular currency

Buyers Credit is normally availed at a lower price as compared to INR denominated term loan or cash credit limits

Importer can roll over the liability of the Buyers Credit to gain extended period of credit