IFC, a member of the World Bank Group said the credit facility will help Buddha Air to buy a twin engine ATR 72 short haul aircraft to strengthen domestic air travel in the country.
IFC says improved air services will cut travel time and better serve tourists visiting the mountainous country.
"IFC’s second investment in Buddha Air will help us consolidate our services in the region," the statement quoted the airline's Managing Director, Birendra Basnet as saying.
Buddha Air received a loan of 10 million US dollars from IFC in 2008 to purchase two ATR-42 aircrafts and to construct a closed-door hangar at the Tribhuvan International Airport in Kathmandu.
The airline operates domestic flights between Kathmandu and Nepal's nine other regional air ports.
Buddha Air also operates sightseeing flights to Mount Everest offering passengers an onboard view of the world's highest mountain peak.