Export financing refers to the financing facilities offered in case of goods exported from the country. Domestic interest rates have generally been higher than the international interest rates. In order to offset the disadvantage of higher interest rates faced by units competing in export markets, the Central Bank has (through the commercial banks) extended concessional financing for exports. The export financing can be broadly classified into:

• Pre-shipment credit

This refers to credit extended prior to shipment of goods by the exporting entity. Such financing is provided for meeting costs related to purchase of goods, processing, packing and shipping. Pre-shipment credit is available both in rupees as well as in foreign currency depending upon the requirement. Credit at concessional terms is currently available for between 90-180 days in case of Pre-Shipment credit.
• Post-shipment credit

Post-shipment credit is provided for financing the exporter subsequent to dispatch of goods until realization of sales proceeds from the foreign buyer as per the terms of the transaction or the letter of credit received from the foreign buyer’s banker. Post shipment credit is available at a concessional rate upto a period of 90 days within which the sales proceeds are normally realized. In case of delay in repatriation of proceeds by the exporter (beyond the 90 days) then normal interest is levied on the entire tenure of the loan.

Other forms of Export financing include Foreign usance bills (FBE) and Foreign Demand Bills (FDB). Foreign L/Cs (FLCs) and Export Performance Guarantees are a means of non-fund based support.

Back to Types of Working Capital Financing

Cash Credit
Working Capital Term Loan
Bills Financing

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