Bizolot

Pre-Shipment Finance

Enabling seamless international trade and sustained growth.

Get personalised quotes

Pre-Shipment Finance: Empowering Exporters on Bizolot

Pre-shipment finance is a vital aspect of international trade, ensuring exporters have the financial resources to fulfill orders and manage expenses before goods are shipped. At Bizolot, we simplify this process by offering insights and tools to optimize your pre-shipment financial planning.

What is Pre-Shipment Finance?

Pre-shipment finance provides businesses with the funds needed to execute export orders and cover pre-shipment expenses like raw material procurement, production, packaging, and transportation. This financing option addresses working capital needs and mitigates cash flow challenges during the initial stages of the export process.

Types of Pre-Shipment Finance

1

Extended Packing Credit Loan

Offers a line of credit based on working capital requirements, determined by creditworthiness, past export performance, and order value.

2

Packing Credit Loan

Secured with collateral, such as goods or inventory, this loan is released upon realization of export proceeds.

3

Packing Credit Loan (Hypothecation)

Similar to packing credit loans but allows exporters to retain control over collateral while securing the loan.

4

Advances Against Red Clause Letter of Credit

Allows exporters to receive advance payments from the issuing bank before shipment, deducted from the final payment upon submitting required shipping documents.

Pre-Shipment Finance Procedure

  1. Assess Funding Needs: Identify working capital requirements for pre-shipment activities.
  2. Choose a Lender: Select a financial institution based on reputation, rates, and terms.
  3. Submit Application: : Provide necessary details and documents
  4. Document Verification: The lender reviews and assesses creditworthiness.
  5. Approval & Offer: Receive loan approval and terms.
  6. Agreement Signing: : Formalize the agreement with necessary contracts.
  7. Utilize Funds: Use the funds for pre-shipment expenses as agreed.
  8. Repayment: : Repay the loan with interest upon export proceeds realization or within the agreed period.

Benefits of Pre-Shipment Finance

✔Smooth Cash Flow: Covers expenses like production, packaging, and logistics.

✔Working Capital Optimization: Frees up resources for efficient allocation and growth.

✔Competitive Advantage: Ensures timely production and delivery of goods.

✔Risk Mitigation: Reduces risks like buyer defaults or payment delays.

✔Flexible Options: Customizable financing terms to meet exporters' specific needs.

✔Facilitates Growth: Enables larger orders and exploration of new markets.

Risks of Pre-Shipment Finance

  1. Counterparty Risk: Potential buyer payment defaults.
  2. Market Risk: Exposure to currency fluctuations.
  3. Quality & Shipment Risk: : : Issues with product quality or shipping delays.
  4. Regulatory Compliance Risk: Adherence to trade regulations and documentation.
  5. Country & Political Risks: Political instability and trade sanctions in export markets.
  6. Non-Delivery Risk: Failure to meet delivery terms leading to liabilities.
  7. Fraud & Documentation Risks: Vulnerability to forged documents or false information.

Required Documents for Pre-Shipment Finance

To apply for pre-shipment finance, exporters typically need the following:

✔Export Order

✔Proforma Invoice

✔Purchase Order

✔Export License/Permits

✔Insurance Documents

✔Bill of Lading/Airway Bill

✔Export Declaration

Bizolot: Your Trusted Partner in International Trade

At Bizolot, we empower exporters to navigate pre-shipment finance confidently. From choosing the right financing option to ensuring compliance, we’re here to help you achieve smooth and successful export operations. Maximize your business potential with Bizolot!