Foreign Trade

Role of Post Shipment Credit in Facilitating International Trade


Blog Post

In the realm of international trade, securing financial support and managing cash flow is crucial for businesses. One such financial instrument that plays a significant role in facilitating global trade is post shipment credit. This form of credit provides financial assistance to exporters after the shipment of goods, ensuring smooth operations and minimizing financial risks. In this article, we will delve into the features and benefits of post shipment credit, with a focus on SMEs in India.

What is Post Shipment Credit

Post Shipment Credit means the provision of funds by financial institutions to exporters after the shipment of goods. It enables exporters to bridge the gap between shipment and payment realization, empowering them to fulfill their working capital requirements efficiently.

Post shipment finance acts as a valuable tool for exporters to manage their cash flow effectively and navigate the uncertainties associated with international trade.

Process of Post Shipment Credit

To avail post shipment credit, exporters are required to comply with certain documentation and submission requirements. These include export documents, bill of lading, and insurance documents. Once the documents are submitted, the bank scrutinizes them to ensure compliance with export regulations and verify shipping and delivery. This meticulous examination helps mitigate risks and ensures a smooth credit process.

Features of Post Shipment Credit

  • Financing options

Post Shipment Credit provides exporters with various financing options. They can choose to negotiate export bills, where the bank purchases the bills at a discounted value. Alternatively, exporters can opt for discounting of export bills, where the bank provides immediate funds against the bills. Additionally, advancing against export bills is another viable option, enabling exporters to receive a portion of the bill value upfront.

  • Credit terms and repayment

The tenure and interest rates associated with post shipment credit are crucial factors to consider. Financial institutions offer flexible repayment schedules, providing exporters the necessary breathing space to effectively manage their cash flow. Moreover, a grace period is often provided, allowing exporters to plan their repayment based on the expected payment realization from importers.

  • Flexibility and convenience

Post Shipment Credit caters to a wide range of eligible goods, including both commodities and manufactured products. This flexibility allows exporters from various industries to access financial support. Additionally, financial institutions offer post shipment finance for sme in multiple currencies and denominations, accommodating the diverse needs of exporters engaged in global trade. Furthermore, customized credit limits are provided, enabling exporters to access the required funds based on their specific business requirements.

  • Risk mitigation and insurance

Export credit insurance is an essential aspect of post shipment credit. It safeguards exporters against the risks of buyer default or non-payment. In the event of a buyer's inability to pay, the insurance coverage ensures that the exporter receives the payment due. This feature provides exporters with confidence and protects them from potential financial losses.

Benefits of Post Shipment Credit

  • Improved Cash Flow

Post Shipment Credit bridges the gap between shipment and payment realization, ensuring a steady cash flow for exporters. This improved liquidity empowers exporters to meet operational expenses, invest in growth initiatives, and seize new business opportunities.

  • Enhanced Working Capital Management

SMEs often face challenges in managing their working capital efficiently. Post Shipment Credit offers a viable solution by providing access to timely funds, enabling SME exporters to optimize their working capital and streamline their business operations.

Increased Competitiveness in lobal Markets

With post shipment credit, SME exporters can compete effectively in the global marketplace. The availability of financial support empowers them to offer competitive terms to international buyers, leading to enhanced business opportunities and market expansion.

  • Reduced financial risks

The inclusion of export credit insurance in post shipment credit mitigates the risks associated with non-payment or default by buyers. This risk coverage provides a safety netto SME exporters, protecting them from potential financial losses and allowing them to focus on their core business operations with peace of mind.

Application Process for Post Shipment Credit

To apply for post shipment finance in India, SME exporters need to carefully select a financial institution that offers suitable terms and conditions. Exporters must submit the necessary paperwork, such as export documents, bills of lading, and insurance documents, after being chosen. The financial institution then assesses the application based on the submitted documentation, legal compliance, and delivery and shipment confirmation. Upon approval, SME exporters can access the funds and utilize them to support their export operations.


Post shipment credit is a useful financial tool for SME exporters in India, giving them the resources and flexibility they need to deal with the challenges of global trade. SMEs can succeed in the global market if they have qualities such as a variety of financing alternatives, flexible loan terms, risk mitigation through export credit insurance, and improved cash flow management. By leveraging post shipment credit, SME exporters can expand their business horizons, increase competitiveness, and contribute to the growth of the Indian economy. It is imperative for SMEs engaged in international trade to explore the benefits of post shipment credit and collaborate with reputable financial institutions to unlock their full export potential.

#post shipment finance#working capital finance#import-export finance#trade credit

Sachin Nigam

Sachin Nigam is the Director, Global Trade at KredX. He is a finance professional with over two decades of experience at some of the world’s most influential institutions like A.P. Moller - Maersk, CRISIL, HSBC, and ICICI Bank. You can connect with him on LinkedIn to know more.