The features of post-shipment finance are :

Post-shipment finance is meant to finance export sales receivable after the date of shipment of goods to the date of realization of exports proceeds. In cases of deemed exports, it is extended to finance receivable against supplies made to designated agencies. A post-shipment finance is provided against evidence of shipment of goods or supplies made to the importer or seller or any other designated agency. Post -shipment finance can be secured or unsecured. Since the finance is extended against evidence of export shipment and bank obtains the documents of title of goods, the finance is normally self liquidating. As a quantum of finance, post-shipment finance can be extended up to 100% of the invoice value of goods. In special cases, where the domestic value of the goods increases the value of the exporter order, finance for a price difference can also be extended and the price difference is covered by the government.

Post-shipment finance can be of short terms or long term, depending on the payment terms offered by the exporter to the overseas importer. In case of cash exports, the maximum period allowed for realization of exports proceeds is six months from the date of shipment. Concessive rate of interest is available for a highest period of 180 days, opening from the date of surrender of documents. Usually, the documents need to be submitted within 21 days from the date of shipment.

Various Types of Export Buyer's Credit :

Post-shipment finance can be provided for three types of export :

1. Physical exports :

   Finance is provided to the actual exporter or to the exporter in whose name the trade documents are transferred.

2. Deemed export :

   Finance is provided to the supplier of the goods which are supplied to the designated agencies.

3. Capital goods and project exports :

   Finance is sometimes extended in the name of overseas buyer. The disbursal of money is directly made to the domestic exporter.

Types of Post Shipment Finance :

Export Bills purchased/discounted : Export Bills negotiated

1. Advance against export bills sent on collection basis.
2. Advance against export on consignment basis
3. Advance against undrawn balance on exports
4. Advance against claims of Duty Drawback.

Export Bill Discounting :

Export Bills Purchased/ Discounted. (DP & DA Bills) : Export bills (Non L/C Bills) is used in terms of sale contract/ order may be discounted or purchased by the banks. It is used in indisputable international trade transactions and the proper limit has to be sanctioned to the exporter for purchase of export bill facility.

Export Bills Negotiated (Bill under L/C) :

The risk of payment is less under the LC, as the issuing bank makes sure the payment. The risk is further reduced, if a bank guarantees the payments by confirming the LC. Because of the inborn security available in this method, banks often become ready to extend the finance against bills under LC. However, this arises two major risk factors for the banks: The risk of nonperformance by the exporter, when he is unable to meet his terms and conditions. In this case, the issuing banks do not honor the letter of credit. The bank also faces the documentary risk where the issuing bank refuses to honour its commitment. So, it is important for the negotiating bank, and the lending bank to properly check all the necessary documents before submission.