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What is PRE Shipment Finance / Packing Credit and Post Shipment Fiance?

Updated: Dec 7, 2023


What is Pre-Shipment and Post-Shipment Finance?

Once an exporter receives a confirmed order from buyer, the exporter becomes responsible for delivery the goods on time. From receiving an order to delivering the product and then finally getting the payment, there are certain tasks that need to be taken care of by the exporter such as procurement, manufacturing, packaging and so on. For accomplishing these tasks exporter needs funds which can be arranged using pre shipment and post shipment finance.


Pre-Shipment Finance or Packing Credit is a type of finance which is provided to a business after exporter has received the order and before the goods have been shipped to the customer. Generally, pre-shipment finance is provided for a short span of time ranging from 30 to 90 days. It is used to finance expenses till the shipment of goods such as raw materials, labour, transportation and other such expenses. There are different types of Pre-Shipment finance available namely Packing Credit Loan (Pledge), Extended Packing Credit Loan, Hypothecation, Advances against a red clause Letter of Credit, Pre-Shipment credit in Foreign Currency (PCFC).


Post-Shipment Finance is a type of finance that is provided to be used by the exporter after the goods has been sent to the buyer and before the payment has been received. After the goods has been shipped, exporter needs to wait (till invoice is generated and time lag between supply and payment is completer) for receiving the payment from buyer. Post-Shipment Finance is provided using instruments such as Letter of credit, Trade Loan and Invoice Factoring.

Post-shipment advance can mainly take the form of –

(i) Export bills purchased/discounted/negotiated.

(ii) Advances against bills for collection.

(iii) (iii) Advances against duty drawback receivable from Government.


Pre-Shipment and Post Shipment Finance can be used when the business is facing cash crunches or the time lag between order confirmation and receipt of payment is long as it helps in improving cash flow, increasing flexibility, reducing risk, improving supplier relationships and eventually enhances competitive.


Interest Rates on Pre-Shipment and Post Shipment Finance

Interest rates varies as per financial position of borrower, duration and instrument of finance. Here is a glimpse of interest rate by SBI:

Indicative SBI Interest Rate for PCFC

1. Up to 90 days: 3 months LIBOR/ EUROLIBOR / EURIBOR+ 2.00%

2. Beyond 90 & up to 180 days: 6 months LIBOR/ EUROLIBOR / EURIBOR+ 2.00%

3. Beyond 180 days and up to 360 days: Rate for initial period of 180 days prevailing at the time of extension plus 2.00%.


How to avail Pre-Shipment or Post Shipment Finance?

For availing pre-shipment or post shipment, exporter needs to submit an application to the lender along with required documents. Then the lender will review the application and approve or reject the application. If approved, exporter gets Pre-shipment or Post shipment finance facility.

For applying in any bank or financial institution, exporter can use online or offline method. In offline mode, go to nearest branch of bank, fill the application form and submit it there. In online mode well as well, steps are quite similar. Here example of some banks is provided:

State Bank of India

Visit SBI website and click on Business banking tab and select export finance. Then click on pre-shipment/Post Shipment credit link. Ensure that the exporter is eligible and read the terms & conditions carefully. If eligible, download the application form, fill it and submit it.

Axis Bank

Visit Axis Bank website and click on Business banking tab and select Trade finance. Then click on pre-shipment/Post Shipment credit link. Ensure that the exporter is eligible and read the terms & conditions carefully. If eligible, download the application form, fill it and submit it.

Bank of Baroda

Visit BOB website and click on Business banking tab and select export finance. Then click on pre-shipment/Post Shipment credit link. Ensure that the exporter is eligible and read the terms & conditions carefully. If eligible, download the application form, fill it and submit it.


Whenever applying for pre-shipment or post shipment finance, an exporter should compare for best rates and favourable terms & conditions from different lenders so as to choose the best option for financing the shipment.


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