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 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
LIB! rates as against local sources of funding "hich are more costly.
The duration of buyer's credit may vary from country to country# as per the local regulations. For
e$ample in India# buyer's credit can be availed for one year in case the import is for tradeable
goods and for three years if the import is for capital goods. %very si$ months# the interest on
buyer's credit may get reset.