Supplier's Credit
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Supplier’s credit is a trade credit facility for imports into India, where a Buyer (importer) is able to avail credit either from the Seller or from a financial institution, preferably from Seller’s country. This is only made available under Letter of Credit (LC) and not accepted for any other import payment methods.
For Importers:
- Ability to negotiate with suppliers for better commercial terms.
- Cheaper source of funds to procure capital/non-capital goods.
- Deal with suppliers on sight basis.
- Extended credit period to ease on operating cycle.
For Exporters:
- Suppliers receive the payment at sight.
Restrictions:
- Can be availed only for imports backed by Letter of Credit (LC).
- Restricted to working capital cycle, for Non-capital goods maximum of 1yr and 3yrs for Capital Goods.
- Buyer (importer) approaches SaveDesk (arranger) with relevant transaction details pertaining to the import i.e., before LC issuance
- SaveDesk gets an offer from overseas financial institutions.
- Buyer confirms on the pricing offered and gets the LC issued through his working capital banker. LC’s are generally restricted to overseas FI’s counters .
- Upon shipment, Supplier submits the documents to their bank, which in turn is sent to overseas FI from whom Supplier’s credit is being availed for scrutiny of documents.
- This is further forwarded to buyer’s bank by overseas FI for acceptance. Upon acceptance by Buyer, buyer’s bank sends overseas FI guaranteeing payment on due date.
- Overseas FI discounts the bill and makes the payment to supplier through their bank.
- On due date, Importer makes the payment to his bank, which in turn is paid to overseas FI to settle the transaction.
No,Supplier’s credit can be availed only for imports backed by LC.
1 year for Non-capital goods & 3 years for Capital goods from the date of shipment.
Under automatic route, USD20 Mn equivalent trade credit can be availed per import. Beyond the prescribed limit, all the transactions are referred by RBI.
- LOU/LOC issuance charges
- Arrangement fee
- LIBOR/EURIBOR + Interest costs
- Document handling cost
- Confirmation cost if suggested by foreign lender
- Hedging cost if availed
Yes, there are a few changes in the LC that needs to be done before issuance. SaveDesk advisor will help you suggest those changes that are required before availing.
Yes,it can be availed on account to some amendments on LC relating to restrictions clause & payment terms.
Rollover is permitted to the extent of permissible tenure depending on the type of import(capital/non-Capital). Non-Capital imports are restricted to your working capital cycle.