Difference between buyers credit and supplier's credit
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Buyer credit is a short term credit available to an importer (buyer) from overseas lenders such as banks and other financial institution for goods they are importing. The overseas banks usually lend the importer (buyer) based on the letter of comfort (a bank guarantee) issued by the importer's bank. For this service the importer's bank or buyer's credit consultant charges a fee called an arrangement fee.
Buyer's credit helps local importers gain access to cheaper foreign funds that may be closer to LIBOR rates as against local sources of funding which are more costly.
The duration of buyer's credit may vary from country to country, as per the local regulations. For example, in India, buyer's credit can be availed for one year in case the import is for tradeable goods and for three years if the import is for capital goods.
Buyer's credit helps local importers gain access to cheaper foreign funds that may be closer to LIBOR rates as against local sources of funding which are more costly.
The duration of buyer's credit may vary from country to country, as per the local regulations. For example, in India, buyer's credit can be availed for one year in case the import is for tradeable goods and for three years if the import is for capital goods.
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