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Export finance in India is structured to support your business at two critical stages of the export cycle: Pre-Shipment (getting the goods ready) and Post-Shipment (waiting for payment after the goods are sent).

1. Pre-Shipment Finance (Packing Credit)

This working capital finance is provided before you ship the goods. It helps you purchase raw materials, manufacture, process, and pack items for export.

  • How it works: Banks advance funds based on a confirmed export order or a Letter of Credit (LC).
  • Forms of Credit:
    • Packing Credit (PC): Available in Indian Rupee (INR) or Foreign Currency (PCFC) to help manage exchange rate exposure.
    • Insta EPC: Many banks now offer instant/real-time disbursement of packing credit for eligible exporters.
  • Eligibility: Requires an active IEC, RCMC (where applicable), and a valid export order.

2. Post-Shipment Finance

This provides liquidity after your goods have been shipped, bridging the gap until the buyer pays you.

  • Export Bill Discounting: Your bank advances funds by discounting your export bills, effectively converting your future receivables into immediate cash.
  • Negotiation of Documents: If you have an LC, the bank negotiates the shipping documents and provides funds upon verification, often without needing further collateral.
  • Advances Against Duty Drawback: You can receive advances against the government duty drawback incentives you are entitled to receive.
  • Export Factoring: A specialized service where you sell your export receivables to a factoring company (the "factor") for immediate cash. The factor often assumes the responsibility for collection and credit risk.

3. Key Institutional Support & Incentives

  • ECGC (Export Credit Guarantee Corporation): Essential for risk mitigation. They provide credit insurance to protect you against buyer default (commercial risk) or political risks (war, transfer restrictions). Their guarantees also help banks feel secure enough to lend to you at better rates.
  • Interest Subvention Scheme: Under the Export Promotion Mission (EPM), the government provides interest subsidies on pre- and post-shipment export credit, specifically targeting MSME exporters to keep their borrowing costs competitive.
  • EXIM Bank: Primarily serves larger exporters and project-based trade with long-tenure financing and buyer credit programs, allowing you to offer competitive payment terms to international buyers.

 

krishna

Krishna is an experienced B2B blogger specializing in creating insightful and engaging content for businesses. With a keen understanding of industry trends and a talent for translating complex concepts into relatable narratives, Krishna helps companies build their brand, connect with their audience, and drive growth through compelling storytelling and strategic communication.

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