Buyer Credit - Project Financing
Structured finance to support investment projects
When a Bank or other financial institution directly provides the customer with a credit line, under the condition of using the money for the payment of a supply, we are witnessing a "buyer credit".
Arranging a buyer credit transaction is much more complex, since it requires the establishment of two simultaneous and coordinated contractual relationships: one between the exporter and the customer, the other between the customer and the lender. Not to mention that often, given the extent of this funding, it is required an additional payment guarantee from a local bank or other entity with the acceptable financial standing.
Buyer credit is the most suitable scheme for those projects where the financial structure is the most important element, such as the so-called “Project Financing” in all of its various schemes. It is the case where the guarantee of repayment is not linked to the debtor’s standing or to an external guarantee, but to the initiative itself and its ability to generate sufficient revenues.
Infrastructure projects (toll highways, bridges, tunnels), plants for the production of electricity or other utilities, waste treatment plants, gas extraction and refining of raw materials: these are typical kind of projects that could be funded under this scheme, which, however, provides an extensive documentation and an accurate - and costly - feasibility analysis.