Buyer's credit is short term credit availed 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 BC consultant charges a fee called an arrangement fee. NumeroUno 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, BC can be availed for one year in case the import is for tradable goods and for three years if the import is for capital goods. Every six months, the interest on buyer's credit may get reset._
Benefits to importer
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Benefits to importer
- The exporter gets paid on due date; whereas importer gets extended date for making an import payment as per the cash flows
- The importer can deal with exporter on sight basis, negotiate a better discount and use the buyers credit route to avail financing.
- The importer can use this financing for any form of trade; open account, collections, or LCs.
- The currency of imports can be different from the funding currency, which enables importers to take a favourable view of a particular currency.
- The customer will import the goods either under LC, collections or open account
- The customer requests the Buyer's Credit Arranger to arrange the credit before the due date of the bill
- Arrange to request overseas bank branches to provide a buyer's credit offer letter in the name of the importer. Best rate of interest is quoted to the importer
- Overseas bank to fund Importer's bank Nostro account for the required amount
- Importer's bank to make import bill payment by utilizing the amount credited (if the borrowing currency is different from the currency of Imports then a cross currency contract is utilized to effect the import payment)
- Importer's bank will recover the required amount from the importer and remit the same to overseas bank on due date.
- It helps importer in working capital management.
More information visit Here:- http://numerouno.net.in/buyers_credit.html