Pre-Shipment vs Post-Shipment Finance: How Export Finance Maps to Your Order Cycle

Pre-shipment finance funds the purchase, processing, manufacturing or packing of goods before they are shipped, while post-shipment finance funds the period after shipment. Together they cover the full order cycle: from winning the order to being paid.

Key facts

• RBI's 2015 Master Circular on export credit defined pre-shipment (packing) credit as bank credit to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment.
• It defined post-shipment credit as bank credit to an exporter from the date of extending credit after shipment of goods or rendering of services.
• The same circular noted that packing credit may be liquidated out of the proceeds of bills drawn for the exported goods, which converts pre-shipment credit into post-shipment credit. RBI has since consolidated its export credit instructions into later Directions, so confirm the current text and your bank's terms.
• Banks are the usual providers of both. Export factoring is a post-shipment tool provided by finance providers against issued invoices.
• Tenor limits and rates are set by the lender and the RBI's directions in force at the time. Check the current directions and your bank's terms; this page does not state any.

Where does each stage sit in the order cycle?

1. Order won. The buyer confirms the order or opens an LC.
2. Pre-shipment stage. You buy materials, manufacture, pack. Pre-shipment finance (packing credit) covers this.
3. Shipment. Goods leave, and you raise an invoice and a shipping bill.
4. Post-shipment stage. You wait for the buyer to pay. Post-shipment finance covers this: bank discounting or negotiation of export bills, or export factoring of an open-account invoice.
5. Payment. The buyer pays, finance is adjusted and the balance reaches you. Proceeds must be realised within the period set by the RBI. See export realisation timelines under FEMA.

What forms does post-shipment finance take?

Typically a bank buys, discounts or negotiates export bills, or lends against bills sent for collection. Export factoring is a different route: a finance provider buys an open-account invoice, advances cash, collects from the buyer and pays you the balance, less charges. See export factoring in India.

How do the two stages connect?

A bank's packing credit is typically adjusted from the proceeds of export bills, which is the point at which the facility turns into post-shipment credit. If a different provider finances the invoice after shipment, the interaction with the bank's packing credit depends on both sets of terms. Tell your bank and your finance provider about each other before you rely on any sequence. Read export factoring vs packing credit for the comparison.

Which stage is your gap?

Frequently asked questions

What is the difference between pre-shipment and post-shipment finance?

Pre-shipment finance funds production and packing before shipment. Post-shipment finance funds the period between shipment and receipt of payment.

Is packing credit pre-shipment or post-shipment?

Packing credit is pre-shipment finance.

Is export factoring pre-shipment or post-shipment?

Post-shipment. It applies to an invoice that has already been issued against shipped goods or delivered services.

Who provides each?

Banks provide pre-shipment credit. Banks and other finance providers provide post-shipment finance, including export factoring.

Sources

• RBI, Master Circular on Rupee/Foreign Currency Export Credit and Customer Service to Exporters, 1 July 2015 (definitions of pre-shipment and post-shipment credit and liquidation of packing credit): rbi.org.in. The instructions have since been consolidated into later RBI Directions; this page has not checked the current consolidated text.
• RBI, Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, Regulation 5: rbi.org.in.