Buyer’s Credit

Buyer’s Credit is the credit availed by an Importer (Buyer) from overseas lenders i.e. banks and financial institutions for payment of his imports on a due date. The overseas banks usually lend the Importer (Buyer) based on the letter of comfort (a Bank Guarantee) issued by the Importers (Buyer’s) Bank. In fact the Importers Bank brokers between the Importer and the overseas lender for arranging buyers credit by issuing its Letter of Comfort for a fee. Buyer’s credit helps local importers access cheaper foreign funds close to LIBOR rates as against local sources of funding which are costly compared to LIBOR rates. Buyers Credit for goods purchases can be for a period of up to 6 months.