Acquire Now

Get The Best Quote




Required documents

ABOUT Buyers Credit

Buyer's credit is a credit availed to an importer (buyer) from overseas lenders such as banks/financial institution for goods they are importing. The overseas banks usually lend the importer based on the letter of comfort (a bank guarantee) issued by the importer's bank.Importer’s bank or Buyers Credit Consultant or importer arranges Buyers credit from international branches of a domestic bank or international banks in foreign countries. For this service the importer's bank or buyer's credit consultant charges a fee called an arrangement fee.


Any individual or any sovereign entity carrying out international trade is eligible for taking a buyer’s credit.

Required Documents

The documents needed vary from case to case. Let FINMART understand your needs and assist you in documents requirement.


The buyer’s credit process typically has the following steps:

  • The exporter enters into a commercial contract with the importer for supply of goods or services.
  • The importer obtains a Letter of Undertaking (LOU) from his bank/financial institution to finance the purchase.
  • The importer’s bank thereafter sends LOU to exporter bank which in turn takes risk on Importer bank and assures payment to the exporter.
  • Once the exporter ships the goods, the lending bank pays the exporter as per the terms of the contract with the buyer.
  • On final day LOU issuing bank makes the payment to the exporter and thus settles the liability of the importer towards the exporter.
  • On the due date, the importer either requests for the rollover of the buyers credit or retires the liability towards the bank against the LOU.
  • The importer makes principal and interest payments to the lending bank according to the terms of the loan agreement until the loan has been repaid in full.
  • The exporter gets paid on due date; whereas importer gets extended date for making an import payment as per the cash flows rather than upfront at the time of purchase.
  • The importer can deal with exporter on sight basis, negotiate a better discount and use the buyer’s credit route to avail financing.
  • The funding currency can be of any country depending on the choice of the customer.
  • The currency of imports can be different from the funding currency, which enables importers to exploit existence of interest rate arbitrage.
  • Interest cost: Charged by overseas bank as a financing cost
  • Letter of Undertaking: Existing bank charges this cost for issuing the letter of Undertaking
  • Forward Booking Cost / Hedging cost (optional)
  • Arrangement fee: Charged by professional arranging buyer's credit
  • Risk premium: Depending on the risk perceived on the transaction.
  • Intermediary bank charges.
  • WHT (Withholding tax): The customer may have to pay WHT on the interest amount remitted overseas to the local tax authorities depending on local tax regulations. In India, the WHT is not applicable where Indian banks arrange for buyer's credit through their offshore offices.
As per the circular by the Reserve Bank of India, a capital goods importer can avail a Buyers Credit for the maximum tenure of 3 years and a revenue goods importer can avail a Buyers Credit for the maximum tenure of 360 days. Every six months, the interest on buyer's credit may get reset.
Ask a Question