Export Finance
Pre-shipment or post-shipment: matching export finance to your cash cycle
Exporters rarely have one working capital gap — they have two, and they open at different moments. Understanding which gap you are funding decides which facility you actually need.
An export order creates two separate cash gaps, and they are easy to conflate.
The first opens the moment you accept the order: you have to buy raw material, run production and pay for packing and inland freight, all before anything leaves your premises. The second opens once the goods have shipped: the documents are with the bank, the buyer has credit terms, and you are waiting to be paid.
Different facilities exist for each, and using the wrong one is a common and expensive mistake.
Pre-shipment finance
Pre-shipment credit — often called packing credit — funds the gap between receiving a confirmed order and shipping against it. It is advanced against the order or letter of credit, and is expected to be liquidated out of the export proceeds when they arrive.
It suits you when:
- Your order book is confirmed but your raw material purchase precedes it by weeks or months.
- Production cycles are long relative to your own supplier credit terms.
- You are turning down orders because you cannot fund the input purchase.
Post-shipment finance
Post-shipment finance covers the period between shipment and realisation of proceeds. In practice it usually means your export receivable is financed or discounted so that you are not waiting out the buyer's credit period.
It suits you when:
- You can fund production comfortably, but buyer credit terms are stretching your cycle.
- You are growing and each additional shipment locks up more cash than the last.
- Currency or collection timing is making cash forecasting unreliable.
Working out which gap is actually binding
A quick diagnostic: look at where cash sits longest on your balance sheet. If it is inventory and work-in-progress, your constraint is pre-shipment. If it is receivables, your constraint is post-shipment. Many exporters need both, in sequence, across a single order — and the two facilities are designed to hand off to each other, with export proceeds retiring the pre-shipment advance.
What lenders will want to see
Regardless of which you use, expect diligence on the buyer as well as on you. Order or LC documentation, past shipment and realisation history, buyer concentration, and the destination market's risk profile all feed the assessment. Exporters who keep clean, retrievable shipment records generally get through this faster.
The short version
Pre-shipment funds making the goods; post-shipment funds waiting to be paid for them. Diagnose which gap is binding before shopping for a facility — the answer changes what you should be asking for.