Export Financing: Problems and precaution measures

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Export Financing: Problems and precaution measures

Export Financing: Problems and precaution measures: Export finance is extended to the exporters in order to assist the exporters to make shipment of the goods as required by the foreign buyers. This facility is allowed against L/C or Buyers & sellers Contract. This finance is encouraged by the government to boost up the export business.

Export Financing: Problems and precaution measures

  1. Types of Export Finance

 There are 2 ( two) stages of export finance. These are as follows:

  1. Pre-shipment Finance
  2. Post-shipment Finance.
  1. Pre-shipment Finance:

 This facility is extended to the exporters before and till the goods shipped for export.

Pre-shipment finance is normally provided up to 80% to 90% of the total export L/C or contract value and the maximum duration for 6 months.

The Pre-shipment Finance is allowed to the exporters for the following purposes:

i)Procuring and processing of raw materials.

ii)Manufacture of finished products ( to meet up wage& salary, rent, gas bill, electricity                                                               bill of the factory)

iii)Packing & Transporting of goods for export. (to meet up freight charge, insurance                                                                         premium, duty and other handling charges)

4. The form of Finance :

 The credit is provided in the following forms:

  • BBL/C
  • PSI (packing cash credit)
  • Baim (com/TR)
  • Murabah

5.Precaution measures for Pre-shipment Finance :

 The following precautions measures should be taken for  sanctioning of Pre-shipment Finance:

i) Export performance and creditworthiness of the exporters to be ascertained.

ii) Banker-customer relationship to be ascertained.

iii) Export L/C should be scrutinized properly(Issuing Bank, Shipment & expiry date payment & B/L clause etc).

iv) Collateral securities should be verified properly.

v) Charge documents and other necessary papers should be obtained.

vi) Goods to be guarded /inspected regularly and comprehensive insurance should be taken against goods.

vii) The Exporter should be advised to obtain  ECG (Export Credit Guarantee) from Sadharan Bima

  1. Post-shipment Finance :

This facility is provided to the exporters after the goods shipped for export.

Post-shipment finance is normally provided upto 90% to 100% of the total export L/C or contract value and the maximum duration for 6 months.

The Post-shipment Finance is allowed to the exporters against shipping documents.

 4.Form Finance

a).Negotiation of documents.

b)Purchase of Foreign Bills under DP/DA  bill

c)Advance against bill collection

d)Purchase of discrepant documents against indemnity or reserve the right to reimburse

e) Advance/Investment against cash incentive or duty drawback.

 

The following precautions measures should be taken for  sanctioning of Post-shipment Finance:

  1. Export performance and creditworthiness of the exporters to be ascertained.
  2. Banker-customer relationship to be ascertained.
  3. Export L/C should be scrutinized properly(Issuing Bank, Shipment & expiry date payment & B/L clause etc).
  4. Collateral securities should be verified properly.
  5. Charge documents and other necessary papers should be obtained.
  6. Indemnity should be taken from the borrower.
  7. In case of deferred payment, acceptance letter should be authenticated.

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Export Financing: Problems and precaution measures

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