Buyer credit
A buyer credit is medium- or long-term financing extended to an overseas buyer (or its borrower) so that capital goods, services or intangibles can be purchased while the exporter receives payment as amounts fall due under the export contract. UK Export Finance's Buyer Credit Facility provides a guarantee to a bank making such a loan: the exporter is paid as under a cash contract, and the buyer repays the loan over an extended period, typically two years or longer.
Buyer credit use on bank export finance desks
On EF desks the funded lender is usually a commercial bank. The export credit agency supplies pure cover (guarantee or insurance) or, in some systems, direct lending. UKEF states that the lending bank is protected against non-payment of principal and interest instalments due under the guaranteed loan. Buyers may be corporate, sovereign or public. Structures can include limited-recourse project finance, Islamic finance, public-private partnerships and capital-markets refinancing.
EXIM describes the same architecture for US capital goods: it supports purchases by guaranteeing or insuring loans to international buyers and, in some cases, by providing direct loans. EXIM loan guarantees can cover 100% of principal and accrued interest for medium- and long-term repayment.
Mechanics, Arrangement limits and eligibility
Under UKEF's published Buyer Credit Facility rules:
- the exporter must carry on business in the UK
- the export contract must be worth at least £5 million (or foreign-currency equivalent)
- the lending bank must be acceptable to UKEF
- repayment must be at least two years
- maximum loan support is 85% of contract value, with a minimum 15% paid by the buyer to the exporter before loan repayment starts
Those 15% down-payment and 85% maximum official-support ceilings mirror the OECD Arrangement disciplines that apply to officially supported export credits with repayment terms of two years or more among Participants. The Arrangement also frames official support as pure cover, official financing support (direct credit, refinancing or interest-rate support), or combinations of those forms.
UKEF's buyer guide notes typical tenors of about two to ten years, with shorter or longer terms depending on sector and structure, and support in more than 60 currencies. EXIM similarly finances up to 85% of contract amount after a cash payment of at least 15%, with floating rates negotiated between buyer and lender on guaranteed loans and fixed rates on direct loans based on the US Treasury rate.
Buyer credit versus supplier credit
A buyer credit funds the buyer through a bank (or ECA) loan. A supplier credit starts from credit extended by the exporter, often evidenced by bills or notes that a bank may purchase under ECA cover. UKEF treats supplier-credit facilities as typically available for lower loan values (under £5 million in its buyer guide), while buyer credit is positioned for larger contracts. Both remain export-credit products subject to national eligibility and, where applicable, Arrangement financial terms.