by 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.
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.
