Pre-shipment finance templates

Case Studies. Contact Us. Client Login. September 4, Pre-Shipment Financing Today, small to mid-sized enterprises SMEs are presented with a menu of options to choose from when seeking trade finance options. What we have seen: A company that exports refrigeration equipment to a multitude of companies in diverse markets ranging from restaurants to supermarkets has a large clientele.

Post Shipment Finance can be defined as any form of load, advance or credit offered to the exporter by a financial institution, after the shipment of goods. It must be noted that the date of providing financial assistance, after the shipment of goods to the realization of proceeds from the exported goods.

Post Shipment Finance is granted to only those exporters, in whose name goods were exported or in whose name the documents concerning the export are transferred. Moreover, finance is extended for short term or long term, which relies on the nature of export. The finance is given against the shipping document which acts as proof that the goods are being shipped. We all are aware of the fact that there is some sort of time gap between the shipment of goods and the realization of proceeds and that is why post-shipment finance is required.

The time gap is mainly due to:. Therefore the main purpose of this form of finance is to extend working capital finance to the exporter, to fill the gap between shipment of goods and realization of proceeds.

The points given below are substantial so far as the difference between pre-shipment and post-shipment finance is concerned:. The finance provider is likely to advance a certain percentage of the value of the order, potentially disbursed in stages as the order is fulfilled. Maturity dates for the financing are established between the seller and finance provider and are often tied to the ultimate date on which the buyer will make payment.

Upon shipment, the finance provider may offer post-shipment financing using techniques such as Receivables Discounting, or Payables Finance to cover the period from shipment and the raising of the invoice until the final payment by the buyer. A typical Pre-shipment financing transaction involves two main parties: the seller and the finance provider.

The buyer is not a party to the financing transaction but depending on the contractual arrangement with the finance provider, the source of the repayment is usually the flow of sales proceeds from the buyer. The history of the commercial relationship is a factor in determining the probability of repayment. Bank and non-bank finance providers are active in this type of financing particularly in Asia. The seller and finance provider enter into a financing agreement detailing terms of the financing structure.

This may but will not always include a security agreement covering assignment of rights transfer of title or a pledge to the underlying work in progress and finished goods prior to shipment. While we can access many traditional forms of finance, we specialise in alternative finance and complex funding solutions related to international trade. We help companies to raise finance in ways that is sometimes out of reach for mainstream lenders.

Trending Now. Diagram — Pre-shipment finance Post-shipment finance Post-shipment finance includes any finance that an exporter can access after they send goods to a buyer. Supply Chain Finance — Diagram. Get started. Want to learn more about trade finance? Download our free guides. Download Now. Trade Finance Products. Pre export finance. Purchase Order Finance.