Project Finance · Question

Can supplier credit on machinery form part of my means of finance?

Short answer

Sometimes, but only on terms the lender accepts. Deferred payment arranged with a machinery supplier can appear in the means of finance as a funding source, though many lenders treat short supplier credit as a temporary liability, not long-term funding. It needs to be documented, its repayment fitted into the cash flows, and its effect on security disclosed.

In more detail

When a supplier agrees to be paid after delivery, in part or in instalments, you effectively borrow from the supplier. That reduces the cash needed at the time of purchase, so a promoter naturally wants it counted.

How lenders usually view it:

Length matters. A credit period of a few months is a timing benefit; longer arrangements behave like debt and affect repayment cover.
Documentation matters. A written agreement with the supplier, showing amounts, dates and any interest, is needed before a lender treats it seriously.
Ranking matters. If the supplier retains ownership of the machine until paid, or takes a charge on it, the lender's own claim on that asset may be affected. Lenders usually insist on first or exclusive charge on funded assets.
Reliability matters. A lender checks whether the payment plan is realistic in the early months when the plant is not yet earning.

Where the machinery is imported, credit from overseas suppliers or arrangements with a financing partner of the supplier work differently and may involve foreign exchange rules, so involve your authorised dealer bank early.

Do not hide it from the lender

A supplier obligation that is not disclosed can surface during verification and damage trust. List every deferred payment in the means of finance and the repayment schedule, even if the amount is modest.

Think of the cost too. Suppliers often build financing charges into the price, so compare the effective cost with the lender's interest before relying on it.

Key points

Supplier credit can be shown as a funding source if documented and acceptable to the lender.
Short credit is often treated as timing relief; longer terms behave like debt.
A supplier's claim on the machine can conflict with the lender's charge.
Disclose every deferred payment in the means of finance and repayment plan.
Compare the supplier's effective cost with bank interest.

Who this applies to

Promoters ordering costly plant and machinery for a new unit.
Importers of equipment negotiating payment terms with overseas suppliers.
Finance heads preparing the sources-of-funds table for a lender.

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.