Financial assistance to exporters

Posted on 06 April 2023 Category : Export incentives and benefits

Export finance - a Key factor in Export trade

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As you know finance plays prime role in any business, even in Export also. Each exporter of any country is highly supported by the government in all means to earn foreign exchange, one of the major indicators of wealth of nation.

In this article, let us discuss some of the export financial assistance provided by government agencies to promote export business. These financial assistance to exporters varies from country to country depends up on their policy adopted time to time. However most of countries extend a good financial support to exporters to earn foreign exchange from other countries to strengthen each country’s foreign exchange reserves, in turn financial strength.

Some of the major benefits supported by government are given below. These financial benefits to exporters may vary from country to country. I provide below the following financial benefits in general. You may cross check with your government authorities to get authenticated information. These details of financial assistance to exporters are given to let you know an idea on ‘how government supports exporters in assisting financial support’.

Finance up to 90% of FOB value of exports

Financial support to exporters up to 90% of FOB value of exports are provided by most of the banks based on the instruction of government to boost exports. Some of the banks extend a financial support of 100% export value, with a narrow interest rate fixed by government time to time.

Interest rate as low as below 6% per year.

Most of the banks provide financial assistance to exporters with a low interest rate as 6% per annum. This rate of interest is very nominal which helps exporters to procure materials, packing or for other export related purposes.

Credit period up to 270 days

Extending credit period up to 270 days is one of the supports under financial assistance to exporters by government through authorized bank. A credit of almost 10 months is a good period for an exporter with least rate of interest on financial assistance to help him to utilize this fund for export purpose. During this period of 270 days, an exporter can procure material, export, and collects his amount of sale of exports to repay such loan amount.

Pre shipment finance – Packing credit

Packing credit is one of the other financial assistance to exporters provided by bank. Getting financial assistance before shipment of goods is a great help for any exporter is concerned. Here, an exporter can avail finance before shipment which is called Packing Credit. Packing credit is pre shipment financial assistance to exporters allotted by banks on the basis of export stocks available for exports. The exporter has to produce copy/original of necessary export orders along with the details of stocks available for exports. The bank authorities inspect the exporter’s premises and collect data of such stock ready for export and assess the value. Based on such valuation of stock, the exporter is allotted packing credit loan by banks with a very narrow interest rate.

Short term credits

Exporters are also eligible to avail financial assistance in the form of short term credits from authorized banks. Short term credits are provided by banks on the basis of instructions provided by government time to time to help exporters to meet their financial requirements.

Post shipment finance - Bill discounting/Bill Negotiation etc.

Financial assistance to exporters after exports in the form of Bill discounting/negotiation is provided by banks with a low interest rate. This financial support also helps exporters to procure/manufacture new products for exports for next export consignment. Once after completing the procedures of an export consignment, the exporter submits all required documents to send to overseas buyer. If the export sale contract between buyer and seller is on credit basis, normally the export bills are sent to buyer for collection of payment on maturity date, mutually agreed. When submitting such documents, if the exporter requires finance for upcoming export consignments, he can apply for post shipment finance by discounting of export bills already exported. In the case of Letter of credit, negotiation procedures are followed to avail post shipment finance.

In short, as per government’s policy, no exporter should suffer for want of funds to export goods. Most of the government supports up to 90% of FOB value of goods with very least rate of interest up to 270 days. This is a great chance for any business man to be attracted to earn foreign exchange.

I hope, I could explain about the financial support extended to exporters to boost export of a country to earn foreign exchange, in turn the financial strengthens of a country.

Have you satisfied with this article about financial support by government to exporters.

Do you wish to share your knowledge and experience about the financial assistance given to exporters in your country?

Share your experience on this subject about the financial support by government through banks to exporters.

The above information is a part of Guide on howtoexport and import

Comment below your thoughts on this subject – How does government/bank help exporters in providing financial support?

Comments

amardeep singh: On 24 January 2014 this is surprising i came from gujarat to amritsar after earthquake in 2001 and here i started export business of aluminium artware handicraft gifts items (pewter) but i did not got any finicial support from any institude even though business was good and with good returns but due to no support from any bank of government i had to shut the business, one i availed a pcl limit that aslo bank granted me after my small plot AS BANK NEED COLOTROL SECURITY SO EITHER THIS WAY OR THAT GOVERNMENT PLAY SAFE ROLL SO WHAT IS THE SUPPORT,, TODAY ALSO I HAVE GREAT ORDER AND GOOD BUSINESS AND ORDERS IN HAND ,,,BUT NO FINANCE , NO PROPERTY, NO BANK BALANCE..... SO HOW TO EXPORT,,,PLEASE EXPLAIN ,,,,,DO U HAVE ANY ANSWER OF MY QUESTION ...ANY SUPPORT FOR MY KIND OF BUYERS.

Deepesh: On 13 February 2015 Just needed your small help. Am not able to decide how and from where should I start understanding the basic concepts and progress towards understanding the difficult terms. Can you please help me design or guide the flow in which I should start on understanding the trade concepts and process flow.

K K Mehta : On 13 February 2015 I seek your guidance in finding solution to one of the issue to be resolved. We have an IT company developing applications for international clients only i.e 100% exports. We regularly get FIRC’s from the bank but recently when we asked for BRC. They told us that we should be registered with STPI/Softex, only then they would consider issue the BRC. Is it mandatory to be registered with STPI to get BRC or we can get BRC without having been registered with STPI. What rules or supporting documents we should furnish to the bank to convince them to issue BRC. Earlier service tax department was accepting FIRCs as a proof for exports, now since few months back they are asking for BRCs.

Mawshan Lyngdoh : On 16 February 2015 My name is Mawshan Lyngdoh and I have an Import Export License under the name on Nonglait Trading; I'm fairly new in the import export world and I require some professional advise. I hope if you can find time from you busy schedule and give me some require advice, would greatly appreciate it. Please see the details below:i have recently got this contact through a friend and he has a client who wants to import rice from India to his country in Angola; I'm not a supplier of rice but I have already found a supplier who can export the rice. My questions are below" 1) How can I go forward with this trade with me being the middle man wherein in the process I will cut my commission from this trade under the frame work. 2) Is it possible for me to ask the buyer to open an LC to my bank and in turn I open an LC to the sellers bank and if possible will the bank look into my financial credibility to open the trade? 3) and thirdly, I only have an Import Export License and Sales Tax Certificate; are those two documents enough to go about with the trade.

Nikhil Singhi : On 16 February 2015 I have a startup renewable energy company and import solar inverters from China. I wonder if you can suggest a customs agent in Mumbai that is honest, reliable and one that charges reasonable price?In my first import, I am importing a small shipment of 25 inverters (HS Code 85044010) being shipped by sea with CIF value of $5750. One customs agent has quoted following charges, but I felt it were on higher side. Do you have any suggestions for me? 1. Custom Duty Rs. 82000.00 2. Octroi charges. Rs. 23944.00 (Receipt) 3. stamp duty Rs. 600 (Receipt) 4. D/O charges as per actual receipt (Rs.7000approx) 5. Transport charges Rs. 5000 (Receipt) 6. Yard Charges :Rs.4000 Approx (Receipt) 7. Custom Clearance Charges:Rs.4000

Nikhil Thakur : On 06 July 2015 I will be importing goods from china in future.Fob Price is 30000 US$, FREIGHT WILL BE 570 US $ INSURANCE WILL BE 0.2 PERCENT OF GOODS What will be cost i need to pay including custom duty.What will be total charges when goods arrive in india. 1US$ RATE = 64RS various hsn code applicable are 84717090,8471800,84733099. under which hsn code duty will be less. What services you offer in imort export.inform Please send calculation chart mentioning ci,countervailig duty,etc in sequence

wasim akram halder: On 03 September 2016 Respected Sir, I, WASIM AKRAM HALDER, have visited your website several times and learned many things. Thanks a thousand time for your mighty and great effort to teach the nation. I have a query- that is- can I get pre shipment finance if I do not have any factory, meaning for the merchant exporter. Though, I am new here learning the ABC of this business. I want to export food and vegetable. Please, Sir Help me. Thanks, Your sincerely WASIM AKRAM HALDER

veerendra : On 10 March 2017 Dear Exporter, You May Be Eligible for Getting Export Incentives (Other Than Duty Draw Back) 2% to 5 % on FOB Value of Exports from Govt. of India Export Incentive Schemes may also be eligible for getting Export Incentives. We Also Provide Following Services:- 1. Issue of Merchandise Exports from India Scheme 2 . Export Promotion Capital Goods (EPCG) 3. Issue of Status Holder Certificate (One Star, Two Star Etc. We Will Provide You With End To End Solutions And Take Care Of Your Entire Requirement Saving Valuable Time And Leave You Free To Concentrate On Your Strengths. Thanking You and Assuring You of Our Best Services Always. With Due Regards, Thanks & Regards

P Gupta : On 12 June 2017 I read your detailed article on export finance.but I hv a query about charges and interest rate: 1.when pc provide on buyer order wise with order wise DP (drawing power), for a period of 6 month ,how bank charge interest on monthly basis on all PC.why not bank charge the same at the time of Liquidate the PC. 2.When PC provided on order wise than why bank asking stock statement on monthly basis. 3.when bank fully secured by collateral and guarantor than why burden of ECGC premium on pc charged to exporter.as exporter did not get any benefit if buyer refused for taking delivery of ready goods. 4.the banks can not charge beyond FEDAI permitted charges ,how we can see allowed charges by FEDAI.as banks even charging for stock audit by third patty yearly basis. Where stock (raw material)is not primary security. 5.the concessional interest rate means bank did not provide other loan cheaper than export credit but still bank earning by good margin.like housing loan is on mclr but for export credit they charged a spread of minimum 1%. Than where it is concessional by banks ?(subvention provided by govt not by banks). 6.As per my experience this strict way of finance by pc liquidation by Foreign currency was apply when interest rate was 6%. And FDR rate was More than 9%. But in current senerio the above process is use less, and by this way banks exploite exporters.

drak shayini: On 12 June 2017 We need to Import Soil Samples from Bangladesh to Bangalore to carry out Laboratory Testing. Can we get assistance to Import.

MG-DISTRIBUIDORA,LDA : On 15 July 2017 i am general manager of company MG-DISTRIBUIDORA,LDA in Cape verde country in Africa. We are young entrepreneurs, we already have a good experience in the food bussiness and 3 years ago we have created our company. And at that moment we have some big Indian companies that want to work with our company and even they have already accepted a bank letter of credit so that we can proceed with the negotiations, but only that we are having a lot of difficulty. Now we want to now if is possible that Mr. Surendran Kollerath can help us to obtaining that Letter credit from the banks in your country. We will be working in a good project with a group of mother head of families and small and medieum stores in the our country. We will work with few margins in order to offer the final customer better access to food. At this moment we are in need of a financing in the amount of 25.000$ usd so that we can advance our project. We want to know how we can obteined this financing.

P Gupta : On 15 July 2017 I read your detailed article on export finance.but I hv a query about charges and interest rate: 1.when pc provide on buyer order wise with order wise DP (drawing power), for a period of 6 month ,how bank charge interest on monthly basis on all PC.why not bank charge the same at the time of Liquidate the PC. 2.When PC provided on order wise than why bank asking stock statement on monthly basis. 3.when bank fully secured by collateral and guarantor than why burden of ECGC premium on pc charged to exporter.as exporter did not get any benefit if buyer refused for taking delivery of ready goods. 4.the banks can not charge beyond FEDAI permitted charges ,how we can see allowed charges by FEDAI.as banks even charging for stock audit by third patty yearly basis. Where stock (raw material)is not primary security. 5.the concessional interest rate means bank did not provide other loan cheaper than export credit but still bank earning by good margin.like housing loan is on mclr but for export credit they charged a spread of minimum 1%. Than where it is concessional by banks ?(subvention provided by govt not by banks). 6.As per my experience this strict way of finance by pc liquidation by Foreign currency was apply when interest rate was 6%. And FDR rate was More than 9%. But in current senerio the above process is use less, and by this way banks exploite exporters.

thanu chidambaram sowmean: On 30 May 2020 Dear right now iam running around for my initial expenditures for my establishment sowmabanam exports which is involved in the production of the cashew apples wine and the cashew apples brandy

bhanu: On 18 February 2021 i have a purchase order on my newly registered company but i have 50 lac but order cost is 1.54 Cr so which bank can fund me for the same..

sandip: On 28 June 2022 I am very glad to write to you about enquiries of export and import. First of all I want to introduce you about myself in electrical and electronics engineering,from NIT Rourkela,I was working for Anabond limited ,I am Envolving in Indian railways tenders Buiessnes and all PSU bodies also. Currently I have started my factory for all types of textile and apparel solutions , currently we make fancy shirt, corporate employees uniform, security guards dresses, school uniform , bedsheets ,pillows ,blanket ,pc pv suitings ,polo shirt , t-shirt, markin cloth many etc ,so I request you sir kindly guide us for how I can export my products in international markets ,what is the procedure to connect with abroad buyer , please guide us sir complete paper work and formalities for the same,I am always gretitude for you.

sumer: On 28 June 2022 We are a well-recognised provider of trade finance services. We provide our trade finance services from Banks and Financial Institutions. We use our credit facility to issue each guarantee on behalf of our clients which are in the field of importing, exporting, trading companies, and numerous stakeholders worldwide who are seeking to expand their business by gaining maximum advantage to their existing cash flow. Whether you are an importer, trader, broker, introducer, or consultant, if you have business that you think might interest us, give us a call or write us an email. Let us know your transaction and together we will find a trade finance solution that serves you best. We, Cash Flow Providers (UK) Provide • Letters of Credit at Sight • Usance Letters of Credit • Standby Letters of Credit • Bank Guarantees • Performance Guarantees • Demand Guarantees • POF Messages • Pre-Advice Message • Comfort Letters • Ready Willing and Able (RWA) Messages Required Documents: We need the following documents/ information for finalising the draft - 1. Completely filled in Application form 2. Performa Invoice for DLC and Verbiage for SBLC & BG 3. Company Trade License or Certificate of Incorporation 4. Share Holders List 5. Passport copy of main signatory The charges vary from transaction basis, and it will be paid before issuance. To understand the process, kindly provide us the application form to start our procedure. Further questions or clarifications contact us without any hesitation. We will be happy to provide all the possible information you want from our side.

Andrey: On 07 July 2022 From time to time we use the information from your web-site about the processes related with export and import is some specific jurisdictions. Now we are in process of creation trade finance practice (and prospective raising of trade financing fund). In this case it would be interesting to get much more information and some credentials about your advisory services.