Pre-shipment finance funds inputs and production costs before goods are shipped to the buyer. The facility may be tied to an export order, purchase order, letter of credit or borrowing base of eligible inventory and costs.
How does Pre-Shipment Finance work in practice?
The exporter uses the facility before shipment to fund inputs, production, packing or other order costs. The provider normally reviews the sales contract, purchase order or letter of credit and sets conditions for drawdown. Once the goods ship, the resulting receivable or export proceeds are applied to repay or convert the pre-shipment exposure.
What records support Pre-Shipment Finance?
Record the order, budget, supplier payments, production milestones, inspections, drawdowns and conversion into shipment or receivables finance.
What does Pre-Shipment Finance not establish?
The repayment source does not exist until production and shipment succeed. Cost overruns or cancellation can leave the facility unsupported.
