Supplier's Credit

Supplier's credit is a form financing which is availed by importer's to finance their import transactions.Financing is done by financial institutions outside India at LIBOR linked rates.

It is a LC based transaction.Importer's bank issues usance Letter of Credit (LC) on behalf of importer and the same is discounted at LIBOR linked rates from financial instituions outside India (including Indian bank's offshore branches).As per RBI guidelines, importers can avail suppliers credit on their imports for a period equal to their operating cycle.Thus supplier's credit provide a medium for Indian importers to benefit from lower cost LIBOR linked funds.

Advantages

• Importers can benefit from cheap LIBOR linked funds.

•  Can get credit for raw material upto their operating cycle.

•  Supplier's get paid on sight and importer's bargaining power rises.

•  Off balance sheet financing.