Pre-shipment Finance

Pre-shipment finance is working-capital finance that is provided by Standard Charted Bank to an exporter, on a “with-recourse basis” against either a confirmed export order from the customer‟s end buyer or against a Letter of Credit. As the exporter, the customer may require working capital finance to purchase goods (if the customer is an intermediary), purchase raw materials for subsequent manufacturing of final goods, warehousing, or to arrange for the transportation of goods.

Standard Charted Bank can offer a pre-shipment credit facility in both Local as well as foreign currency.

Benefits

The customer will receive funds in advance, which may be used to fund working capital needs, such as the purchase or manufacture of goods, or to arrange for transportation or storage

Since the customer has either an Export Order or a Letter of Credit to support the customer‟s your application, the cost of financing will invariably be much cheaper than an overdraft (in general, financing costs will be cheaper if supporting sales are through a letter of credit rather than the export order)

With a lower cost of financing the customer may be able to negotiate better contract terms with the buyers vis-a-vis competitors.

Bank Requirements

The Bank will typically finance up to 70% of the individual Export Order or Letter of Credit since the sale price should always be higher than the buying price

The maximum tenor accorded under this facility is typically around 90 days or less but this may be extended, depending on the customer‟s cash conversion cycle up to maximum of 120 days

If pre-export finance is against a Letter of Credit the customer may be required to instruct us to add our confirmation to the Letter of Credit, subject to the bank‟s and country risk assessment.

The customer will need to be an existing customer of Standard Charted Bank, and preferably have a proven performance track record

The terms of trade and the size of the transaction should follow normal trading patterns between the customer and the end buyer

The parties in the Letter of Credit or Export Order should not be related parties

Standard Charted Bank must retain the original export order documents or export Letter of Credit, and arrangements must be made to have the export proceeds paid directly to Standard Charted Bank. Furthermore, if pre-shipment financing is affected against a Letter of Credit the customer will be required to negotiate the documents through Standard Charted Bank