Question

Distinguish between the following.

Pre-shipment and Post-shipment Finance.

Answer 1

Export finance refers to the loans granted by banks to the manufacturers for manufacturing goods meant for exports. Under this, there are two kinds of finances, i.e. pre-shipment finance and post-shipment finance
Pre-shipment finance refers to the credit obtained before the shipment of goods. It is used for purchasing raw materials to undertake production activities, packaging of goods and transporting goods to the port of shipment.
In post-shipment finance, credit is obtained after the shipment of goods. It is used for financing activities beginning from the date of receiving credit till the time the payment is received from the importer.