Financing - Overview

Packing Credit financing allows exporters to purchase the goods and services to produce the goods for export. More specifically, Packing Credit facilities extended by the banks can provide a means for exporters who lack sufficient internal liquidity to process and acquire goods and services to fulfill export orders and extend open account terms to their foreign buyers. Packing Credit funds are commonly used to finance three different areas; Materials, Labor, and Inventory. An unexpected large export order or many incremental export orders can often place challenging demands on working capital. Packing Credit financing helps to ease and stabilize the cash flow problems of exporters while they fulfill export sales and grow competitively in the global market.

Business flow diagram of Packing Credit Account (LC):

Business flow diagram of Packing Credit Account (Export Order):

 

Import loan allows the importer or buyers to get the goods or documents under import letter of credit or collection in the event that the importer does not have sufficient liquidity to settle a payment immediately. This mechanism allows the importers to take possession of goods or obtain shipping documents without making immediate payment.

Bill purchase/discount is a kind of loan provided by a financial institution to an exporter against a shipment that has already been made. This type of finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds. Exporters don’t wait for the importer to deposit the funds. This type of finance is provided against evidence of shipment of goods or supplies made to the importer or seller or any other designated agency.

Export bills used in terms of sale contract/order may be discounted or purchased by the banks. It is used in indisputable international trade transactions and the proper limit has to be sanctioned to the exporter for purchase of export bill facility. This can be secured or unsecured. Since the finance is extended against evidence of export shipment and bank obtains the documents of title of goods, or backed by Letter of Credit, the finance is normally self-liquidating in nature.

Business flow diagram of bill purchase/discount:

This option facilitates the customer to provide payment instructions for the import bills or collections. While providing such instructions, the customer can apply the funds from multiple sources such as debit accounts, forward contracts or even use the proceeds expected from an export order of the corporate.