Export packing credit is a type of loan given to exporters by banks or financial institutions to fund their pre-shipment and post-shipment requirements. This credit facility is designed to help exporters meet their working capital needs, so they can fulfil their export orders without any financial constraints. Export credit, in general, is an essential tool for international trade, as it helps exporters to compete in global markets by providing them with timely and adequate finance.
In this article, we will discuss everything you need to know about export packing credit, including its meaning, features, benefits, and how to apply for it.
Features of export packing credit
- It is a short-term credit facility: The credit facility is provided for a maximum period of 180 days, or as per the requirements of the exporter.
- Flexible repayment: The exporter can repay the credit amount in installments as per the repayment schedule.
- Low interest rates: Banks and financial institutions offer export packing credit at a relatively low-interest rate when compared to normal business loans.
- No collateral: Export packing credits are unsecured loans and do not require any collateral or security from the exporter.
- Post-shipment finance: Under this facility, banks also offer post-shipment finance, which helps exporters to finance their receivables from customers.
Here are some additional points to consider about export packing credit:
Eligibility criteria
To be eligible for export packing credit, the exporter must meet certain criteria, including having a valid export order, being a registered exporter, having a good credit history, and having all the necessary export documents.
Interest rates
The interest rates for export packing credit may vary from bank to bank, but in general, they are lower than other forms of commercial credit. Banks may also charge a processing fee, which varies depending on the amount of credit extended.
Documentation required
To apply for export packing credit, exporters need to provide several documents, including the export order, purchase order, invoice, packing list, shipping bill, bill of lading, insurance cover note, and any other documents required by the bank.
Repayment process
Export packing credit is a short-term credit facility, and the exporter must repay the loan within 180 days. The repayment schedule is flexible and can be tailored to the exporter's needs.
Packing credit vs Letter of credit
- Packing credit is a pre-shipment finance option that offers working capital to exporters to cover production and shipping expenses. In contrast, a letter of credit is a financial guarantee from a bank ensuring that payment will be made to the seller once the goods are shipped and the required documents are presented.
- Packing credit supplies the essential funds needed for exporting goods, whereas a letter of credit offers payment security to both the importer and exporter.
How to apply for export packing credit?
Exporters can apply for export packing credit through any of the authorised banks or financial institutions. They need to submit a detailed project report, along with the required documents such as export orders, purchase orders, invoices, packing lists, etc. Financial institutions will then evaluate the creditworthiness of the exporter and offer a credit limit based on their eligibility.
Export packing credit is an essential credit facility for exporters that enables them to meet their working capital requirements and compete in the global market. It provides timely finance at low-interest rates, with flexible repayment options. By understanding its intricacies, leveraging its benefits, and exploring the tailored solutions available, your business can pave the way for seamless international trade and sustainable growth.
