Self liquidating credit

Packing credit also covers the manufacturing-related expenses like wages, a cost of raw materials, etc.

This is especially useful if the exporter has outsourced all or a part of the goods to be shipped.

Instead of emptying their own liquid reserves, the banks and other lending institutions provide them with a cheap and convenient way to support their supply chains.

A type of short- or intermediate-term credit that is repaid with money generated by the assets it is used to purchase.

The bank will make the funds available to a letter of credit issued favoring the seller and a confirmed order for selling the goods or services.

The advance is provided to purchase raw materials, process, manufacture, pack, market and transport the required goods and services.

Packing credit is the most commonly used trade finance tool by an exporter.

All the banks may not have standard interest rates for packing credit as it varies depending on the business’ nature, borrowing amount, etc.

This also eliminates a lot of risk from the financing as the bank has the assurance of payment before the exporter receives the proceeds.

Packing credit is a convenient way to purchase expensive goods or raw materials even if they exceed the set budget.

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