Page 95 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation Karan Arora, Lovely Professional University

Notes Unit 5: Methods of Financing Exporters and Business
Risk Management

CONTENTS
Objectives
Introduction
5.1 Pre-shipment Finance
5.2 Post-shipment Export Advance

5.3 Role of Export-Import Bank of India in Export Finance
5.4 Factoring
5.5 Types of Risk and Insurance
5.6 Quality and Pre-Shipment Inspection
5.7 Summary
5.8 Keywords

5.9 Review Questions
5.10 Further Readings

Objectives

After studying this unit, you will be able to:

Explain Pre shipment Finance
Describe Post shipment export Advance
Explain Factoring and Insurance
Describe Types of Risk
Discuss Quality and Pre-shipment Inspection

Introduction

International trade is fiercely competitive. The exporter needs to have a competitive edge over
other suppliers from various countries. To this end, access to export finance at competitive rates
of interest will immensely serve the exporter’s cause. Both types of finance facilities are important.
Pre-shipment finance, helps the exporter to get started with procurement and production. Timely
availability of funds will define the exporter’s ability to ship the right quality of goods at the
right time. Post-shipment finance assumes importance in view of the exporter’s need to extend
credit to the importers to remain competitive. This period, when goods have gone and payment
is yet to come, poses severe liquidity challenges to the exporter. Post-shipment finance provides
effective solutions to the liquidity woes of the exporter.
Commercial banks offer export finance at special rates to the exporters in tune with the export
promotion initiatives of the government to boost exports. Concessional interest rates and liberal
schemes have been introduced in India by the Commerce Ministry through the Reserve Bank of
India (RBI).

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