Answer to Question #49704 in Finance for abdull sabit

Question

What do you mean by pre-shipment and post-shipment advances?Discuss.

Answer 1

Pre-Shipment Finance is issued by a financial institution when the seller want the payment of the goods before shipment. The main objectives behind pre-shipment finance or pre-export finance is to enable exporter to:
- Procure raw materials.
- Carry out manufacturing process.
- Provide a secure warehouse for goods and raw materials.
- Process and pack the goods.
- Ship the goods to the buyers.
- Meet other financial cost of the business.
Post Shipment Finance is a kind of loan provided by a financial institution to an exporter or seller against a shipment that has already been made. This type of export 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.