ARRANGING EXPORT FINANCE

Lijo Johnson
HOW TO EXPORT
•Golden Rule.

•Sell Experience.

•Selling in Export.

•On-time Deliveries.

•Communication

•Testing Products

•Approach
GOLDEN RULE.

 One must  fully research its markets.

 Overseas design and product requirements must be

carefully considered.

 Always sell as close to the market as possible.

 The fewer intermediaries one has the better.

 They must be produced with due regard to the needs of

export markets
 SELL EXPERIENCE.

• Ifa person cannot easily export his goods, may be he can

sell his experience. Alternatively, he can concentrate on
supplying goods and materials to exporters' who already have
established an export trade.

•He can concentrate on making what are termed 'own brand'

products, much demanded by buyers in overseas markets which
have the manufacturing know-how or facilities.
SELLING IN EXPORT

•In today's competitive world, everyone has to be sold.

•The customer always has a choice of suppliers.
•Selling
is an honorable profession, and you have to be an expert
salesman.
 ON-TIME DELIVERIES.

•Late deliveries are not always an exporters fault.

•Dock strikes, go-slows, etc. occur almost everywhere in the

world.

•Ifone enters into export for the first time, he must ensure of
fast and efficient delivery of the promised consignment.
COMMUNICATION

•Communication internal and external must be comprehensive

and immediate.

•Good communication is vital in export.

•Whenyou are in doubt, pick up the phone or email for

immediate clarification.
TESTING PRODUCT
•The risk of failure in export markets can be minimized by
intelligent use of research.

•Before committing to a large-scale operation  overseas, try  out

on a small scale. Use the a sample test, and any mistakes can
then be corrected without much harm having been done.

•While the test campaign may appear to cost more initially,

remember that some of the cost will be repaid by sales, so that
test marketing often turns out to be cheaper.
 APPROACH

If possible some indication of the attitudes towards the product

should be established, like any sales operation. Even if the
product is successful, to obtain reactions from the customer.
ARRANGING FINANCE
Financial assistance to the exporters are generally provided by
Commercial Banks, before shipment as well as after shipment of the
said goods.
 The assistance provided before shipment of goods is
known as per-shipment finance and that provided after
the shipment of goods is known as post-shipment
finance.
1. Pre-shipment finance is given for working
capital for purchase of raw-material, processing,
packing, transportation, ware-housing etc. of the
goods meant for export.

2. Post-shipment finance is provided for bridging

the gap between the shipment of goods and
realization of export proceeds.
•The later is done by the Banks by purchasing or
negotiating the export documents or by
extending advance against export bills accepted
on collection basis.

•While doing so, the Banks adjust the pre-

shipment advance, if any, already granted to the
exporter.
PRE-SHIPMENT FINANCE

An application for pre-shipment advance should be made by

you to your banker along with the following documents:
 Confirmed export order/contract etc. in original. Where it is not
available, an undertaking to the effect that the same will be
produced to the bank within a reasonable time for verification and
endorsement should be given.
 An undertaking that the advance will be utilized for the specific
purpose of procuring/manufacturing/shipping etc., of the goods
meant for export only, as stated in the relative confirmed export
order or the L/C.
 If you are a sub-supplier and want to supply the goods to the
Export/Trading/Star Trading House or Merchant Exporter.
 Copies of Income Tax/Wealth Tax assessment Order for the last 2-3
years in the case of sole proprietary and partnership firm.
 Copy of Exporter's Code Number (CNX).

 Copy of a valid RCMC held by you and/or the Export/Trading

Certificate.

 Appropriate policy/guarantee of the ECGC.

 Any other document required by the Bank. For encouraging exports,

R.B.I. has instructed the banks to grant preshipment advance at a
concessional rate of interest.
SPECIAL SCHEMES ARE ALSO AVAILABLE
IN RESPECT OF PRE-SHIPMENT FINANCE
 Exim Bank's scheme.

 Scheme of export packing credit to sub-suppliers from

export order.

 Packing credit for deemed exports.

 Pre-shipment Credit in Foreign Currency (PCFC).

POST SHIPMENT FINANCE

 Post-shipment finance is the finance provided against

shipping documents.

 It is also provided against duty drawback claims.

 It is provided in the following forms.

PURCHASE OF EXPORT DOCUMENTS
DRAWN UNDER EXPORT ORDER
  Purchase or discount facilities in respect of export bills drawn under
confirmed export order are generally granted to the customers who are
enjoying Bill Purchase/Discounting limits from the Bank.

 The bank financing against export bills is open to the risk of non-
payment.

 Banks, in order to enhance security, generally opt for ECGC policies

and guarantees which are issued in favor of the exporter/banks to protect
their interest on percentage basis in case of non-payment or delayed
payment which is not on account of mischief, mistake or negligence on
the part of exporter.

 At the time of purchasing the bill bank has to ascertain that this drawee
limit is not exceeded so as to make the bank ineligible for claim in case
of non-payment
ADVANCES AGAINST EXPORT BILLS
SENT ON COLLECTION
 It may sometimes be possible to avail advance against
export bills sent on collection.
 Advance against such bills is granted by way of a
'separate loan' usually termed as 'post-shipment loan'.
 A margin of 10 to 25% is, however, stipulated in such
cases
 This type of facility is, however, not very popular and
most of the advances against export bills are made by the
bank by way of negotiation/purchase/discount.
ADVANCE AGAINST GOODS SENT ON
CONSIGNMENT BASIS
 When the goods are exported on consignment basis at
the risk of the exporter for sale and eventual remittance
of sale proceeds to him by the agent/consignee, bank
may finance against such transaction subject to the
customer enjoying specific limit to that effect

 Trust Receipt/Undertaking to deliver the sale proceeds

by specified date, which should be within the prescribed
date
ADVANCE AGAINST UNDRAWN
BALANCE
 In certain lines of export it is the trade practice that bills
are not to be drawn for the full invoice value of the
goods.
 Banks do finance against the undrawn balance if
undrawn balance is in conformity with the normal level
of balance left undrawn in the particular line of export
subject to a maximum of 10% of the value of export.
 Against the specific prior approval from Reserve Bank
of India the percentage of undrawn balance can be
enhanced by the exporter
ADVANCE AGAINST RETENTION
MONEY
 Banks also grant advances against retention money,
which is payable within one year from the date of
shipment, at a concessional rate of interest up to 90 days.

 If such advances extend beyond one year, they are

treated as deferred payment advances which are also
eligible for concessional rate of interest.
ADVANCES AGAINST CLAIMS OF DUTY
DRAWBACK
 Duty Drawback is permitted against exports of different
categories of goods under the 'Customs and Central
Excise Duty Drawback Rules, 1995.

 The claims of duty drawback are settled by Custom

House at the rates determined and notified by the
Directorate.

 A copy of the shipping bill presented by the exporter at

the time of making shipment of goods serves the purpose
of claim of duty drawback as well.
THANK YOU