Export–Import Finance · Question

What is the difference between buyer credit and supplier credit for imports?

Short answer

In supplier credit, the overseas seller allows you time to pay, so the supplier carries the financing and prices it into the deal. In buyer credit, an overseas bank or lender pays the supplier on your behalf and you repay that lender later with interest. The first is a trade arrangement between two businesses; the second is a loan arranged through your authorised dealer bank.

In more detail

Both give you time to pay for imported goods, but the party who bears the cost and the risk is different.

In supplier credit, the seller ships the goods and agrees that payment is due after a stated period, perhaps secured by a bank instrument or your promise to pay. The financing cost is usually built into the price, sometimes visibly as interest and sometimes hidden in a higher unit rate. The supplier carries the risk of non-payment, so it will assess your standing or ask for bank support. The paperwork is simpler, but suppliers with limited resources may not offer long periods.

In buyer credit, a bank or financial institution outside India lends against your import. It pays the supplier at once, so the supplier receives cash on the due date, while you owe the lender for the agreed term. The lender's pricing is typically tied to an international reference rate plus a margin, and your own bank usually has to provide an undertaking or similar support. Eligibility, permitted tenor and cost limits are set by foreign exchange regulations and may change, so rely on your authorised dealer bank for the current position.

Currency exposure remains

Both routes leave you owing a foreign currency amount in future. Unless you hedge, a weaker rupee raises the rupee cost of repayment. Buyer credit also adds a separate liability that should be tracked with your other borrowings.

When comparing, set the supplier's price with credit against its cash price, then add the cost, charges and hedging of the buyer credit. Sometimes a supplier's cash price discount plus buyer credit works out cheaper than an extended credit price, and sometimes not.

Key points

Supplier credit is deferred payment granted by the seller; buyer credit is a loan from an overseas lender.
Supplier credit cost is often embedded in the price, so compare with the cash price.
Buyer credit generally needs support from your bank and must follow current regulations.
Neither removes the currency risk, which needs a separate hedging decision.

Who this applies to

Importers deciding how to fund purchases of machinery or inputs.
Companies negotiating payment terms with overseas suppliers.
Finance teams weighing deferred payment against a foreign currency loan.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority. Lalsar Holdings' financial advisory and financing work is advisory and facilitation only. Lalsar Holdings is not a lender. Sanction and disbursement of any credit facility is at the sole discretion of the partner bank, NBFC, or financial institution involved, subject to their own eligibility criteria and credit policy.