What is Pre Shipment Finance?

Pre shipment finance is the advance extended to the exporters prior to the shipment of goods for the export order. It can be extended from the date of receiving the export order till the date of actual shipment of goods.

A financier usually provides pre shipment finance to the exporter with-recourse basis against confirmed export order or against a LC (Letter of Credit) up to 270 days from advance.

Pre shipment finance or packing credit is provided to the exporters for purchase of raw materials, their processing and conversion into finished goods including labor and packaging, warehousing, transportation or shipping and for payment of other pre-shipment expenses like customs and excise clearance and pre shipment inspection.

What does Post Shipment Finance Mean?

Post shipment finance is any kind of advance extended to the exporters after the shipment of goods till the date of realization of export proceeds for meeting working capital requirements. Learn more about the types of post shipment finance here

The financier extends a loan at concessional rate of interest against the shipping documents which acts as an evidence of goods being shipped.

Post shipment credit can be short or medium term depending upon the nature of exports. There are rarely cases where a post shipment finance solution extends beyond 60 days. The quantum of credit is generally a fixed % of the export order value.

Difference Between Pre Shipment and Post Shipment Finance

Pre and post shipment finance are mechanisms used to finance export trade, based on the stage at which funding is provided.

The scheme of export financing, as a concept, was first introduced by the Reserve Bank of India (RBI) in 1967 to enable the exporters to have easy access to short-term working capital finance at internationally comparable interest rates.

Since then, banks and now, several financial institutions and fin-tech platforms have come up with innovative financing products for pre and post shipment finance to help small scale manufacturers meet their working capital needs and compete globally.

Pre-shipment finance is also known as packing credit or purchase order financing as it is provided against purchase orders confirmed by the buyer.

Table on Difference between Pre and Post Shipment Finance


Pre shipment and post shipment finance is available to all types of exporters such as merchant exporters, manufacturer exporters, export and trading houses, manufacturers supplying goods to export houses (EH), trading houses (TH), or merchant exporters.

It can also be offered by banks, NBFCs & other financial institutions.

While there strict laws or restrictions governing pre & post shipment loans do exist and is governed by the RBI, other types of credit and advances are in a relatively low regulation zone. This has given rise a number of trade finance tech platforms like Drip Capital.

FAQs on Pre & Post Shipment Finance

Why is Post-Shipment Credit required? To provide working capital for the gap between shipment of goods to receipt of payment from the importer. It allows flexibility of financing at low cost and without a collateral

Can a Pre and Post Shipment Credit be received in foreign currency denominations? Yes, financial institutions in India also provide advances in dollar denominations.

What is the Pre-Shipment inspection process? Trade operators like buyers, suppliers and agencies inspect manufactured products before shipping them to ensure quality and quantity of the merchandise being shipped.