What are the different types of post shipment finance?
Types of post-shipment credit
- Export bills purchased/discounted/negotiated.
- Advances against bills for collection.
- Advances against duty drawback receivable from government.
- Advance against export on consignment basis.
- Advance against undrawn balance.
What is meant by pre-shipment finance?
Pre-shipment finance includes any finance that an exporter can access before they send goods to a buyer. Once the business receives a confirmed order from a buyer, it has an obligation to deliver the finished goods.
What is the difference between pre-shipment finance and post shipment finance?
Pre-shipment finance is a facility of extending working capital finance, to the exporter of the goods, in order to export them in another country. Post shipment finance is a form of the loan extended by the bank to the exporter against the shipment of goods which is already done.
Who is eligible for post shipment finance?
First, the applicant has to be an Indian exporter with a proven track record. The credit amount should be within the maximum permissible bank finance (MPBF) of the borrower’s limit. A margin of around 10% under post-shipment credit is applicable. Adequate security might be required in some cases.
What do you mean by Inco terms?
Incoterms is an abbreviation of the phrase “International Commercial Terms.” It is a term trademarked by the International Chamber of Commerce. An Incoterm is something that describes and defines a transaction between two parties, usually the party exporting goods and the party importing them.
How many parties are involved in LC?
It guarantees that the payment will be made by the importer subjected to conditions mentioned in the LC. There are 4 parties involved in the letter of credit i.e the exporter, the importer, issuing bank and the advising bank (confirming bank).
Why is post shipment finance necessary?
Post- shipment finance (short-term) is generally granted for the following purposes: To provide working capital so as to fill up the gap between the shipment of goods and the realisation of sales proceeds. To pay insurance charges for insuring goods against perils of sea.
What is difference between FCA and DDP?
As per Inco terms, DDP means Delivered Duty Paid (named destination place mentioned). FCA means, Free Carrier ( up to the destination location mentioned).
What is the difference between DDU and CIF?
DDU means that the customs duty and taxes at the destination port are paid by the buyer. As we can see, DDP and DDU are concerned with the payment of customs duties and taxes during the import process whereas CIF, CFR, and CIP are all about the cost of goods, insurance, and sea freight.
Why is LC necessary?
Letters of credit are indispensable for international transactions since they ensure that payment will be received. Using documentary letters of credit allows the seller to significantly reduce the risk of non-payment for delivered goods, by replacing the risk of the buyer with that of the banks.
What’s the difference between post shipment and post-shipment finance?
Whereas the finance provided after shipment of goods is called post-shipment finance. Credit facility extended to an exporter from the date of shipment of goods till the realization of the export proceeds is called Post-shipment Credit. To pay to agents/distributors and others for their services.
When do you need post shipment finance for export?
There is always a time gap between the shipment of goods and receipt of payment from the importer. The exporter needs finance for this intervening period. The commercial banks provide the financing facility to the export for this purpose, known as post-shipment finance. What is Pre-Shipment Finance in Exports? and its Types. 1.
How is post shipment finance can be liquidated?
Post-shipment credit is to be liquidated by the proceeds of export bills received from abroad in respect of goods exported / services rendered. However, subject to mutual agreement between the exporter and the banker, it can also be repaid /prepaid out of balances in EEFC A/C or from proceeds of any other unfinanced (collection) export bills.
How does post shipment finance work on consignment basis?
(d) Advance against Goods sent on Consignment Basis: When goods are, exported on consignment basis export proceeds are received after sale of goods In such cases, the overseas branch of exporter’s bank delivers documents against Trust Receipt and the post-shipment advance is adjusted against export proceeds realised later.