Import credit is a financial facility offered by banks and NBFCs to help businesses pay an overseas supplier to import goods or for opting for services. These financial institutions provide the amount as a short-term credit to the business, which has to be paid with a decided interest.
Import credit facility helps the banks to manage their working capital and ensure smooth business operations without entirely depleting the funds. However, before approving the funds, the bank takes some time to assess the applicant’s financial status and documents carefully.
How It Works:
- The importer places an order with a foreign supplier.
- A financial institution provides credit support.
- The supplier receives payment or assurance.
- The importer repays the lender after a specified period.
Benefits:
- Improves cash flow
- Enables bulk purchasing
- Supports business expansion
- Reduces immediate financial burden
Example:
An Indian company imports machinery worth ₹10 lakh from Germany. A bank provides import credit to pay the supplier, and the company repays the bank later as per the agreed terms.