Overseas buyers rarely want to pay cash for major projects or imports of high-value capital goods and services. At the same time, few exporters have sufficient cash flow to grant long-term credit to their buyers. The exporter can overcome this deadlock by making use of ABN AMRO Bank’s buyer credit.
A buyer credit is based on a financial contract between an exporter’s bank and the buyer or the buyer’s bank. The buyer credit takes the form of bills issued to our order and signed by your buyer only. The financial contract states that ABN AMRO Bank grants the buyer a credit facility so that they can pay you in cash.
As the direct creditor of the foreign buyer, ABN AMRO Bank bears the foreign risks. Part of this risk will be covered by credit insurance from the export credit agency of the seller’s country.
Buyer credit works as follows:
- You as exporter, sign a commercial contract with your international buyer to supply goods or services.
- A financial contract is entered into between ABN AMRO Bank and your international buyer or their bank, in order to finance your supply of goods or services on credit terms.
- ABN AMRO Bank receives an export credit agency guarantee, which covers the risk of default on repayment.
- ABN AMRO Bank advances the funds to you in line with the terms of the export supply contract.
- Your buyer makes loan repayments to ABN AMRO Bank in accordance with the agreed repayment schedule.
In other words, your buyer gets a term loan and you get your cash upfront. Financial contracts like these require extensive and lengthy legal negotiation. Due to the costs involved, buyer credit is most useful for export transactions of EUR 5 million and more. If you anticipate a potential deal, contact your Relationship Manager.