Buyer's Credit

Buyer's credit is a type of loan extended to an importer to help them bring in goods from an international sale.

Say a business wants to buy supplies from another country. The business draws up the contract with the seller (exporter), and secures the loan from a bank in their country. A credit agency based in the exporter’s country provides a guarantee to the buyer's lending bank. The goods are shipped, and then the lending bank pays the exporting group as per the purchase contract. From there, the buyer pays off their lending bank.

Think of it this way: it's like two institutions backing opposite ends of an international sale...one for the buyer, and one for the seller.

Typically, these deals are reserved for large transactions, a few million dollars being considered the minimum. You can see then why these buyers need these types of credits. It makes the purchase easier to manage financially.