Exporting creates a cash gap. You buy raw materials, pay wages, and cover production and shipping costs — often months before the buyer pays. For growing exporters, finding the cash to fund that gap is one of the biggest constraints. Export finance exists to fill it.
Understand Your Cash Cycle
Map the time from buying materials to receiving payment:
- Raw material purchase
- Production
- Shipment
- Transit
- Payment (depending on terms)
If this cycle is 120 days and you fulfil large orders, the working capital needed can quickly exceed what the business has available. See export shipment timeline.
Pre-Shipment Finance
Funding before goods are shipped — to buy materials and produce the order.
- Packing credit or pre-shipment loans: short-term loans from your bank against a confirmed export order or LC
- Advance payments from buyers: the cheapest form of pre-shipment finance — see advance payment negotiation
- Supplier credit: negotiating longer payment terms with your raw material suppliers
Post-Shipment Finance
Funding after shipment, while you wait for payment.
- LC discounting or negotiation: under a usance LC, your bank can pay you early, less a discount
- Discounting of collections: some banks will finance bills under documentary collections, especially with credit insurance
- Invoice financing and factoring: a financier advances funds against your export receivables
- Forfaiting: the sale of medium- or long-term receivables, often guaranteed by a bank, without recourse to you
Export Refinance Schemes in Pakistan
The State Bank of Pakistan has long operated concessionary refinance schemes for exporters — for working capital and for long-term investment in machinery — through commercial banks. The schemes, their rates, and eligibility rules have been revised from time to time. Ask your bank's trade finance team which schemes are currently available for your sector and how to qualify. The EXIM Bank of Pakistan also offers export-related products; check its current offerings.
Separately, the FBR's Export Facilitation Scheme allows eligible exporters to import inputs used in export production without paying certain duties and taxes upfront, which also eases cash flow. Confirm eligibility and current procedures with your tax adviser.
💡 Talk to your bank before you need the money
Export finance takes time to set up — credit assessments, documentation, and limits. Start the conversation when things are going well, not when a large order arrives and you need funds in two weeks.
Export Credit Insurance as a Finance Tool
Insured receivables are more attractive to lenders. Credit insurance can make it easier to obtain post-shipment finance or to offer competitive terms to buyers. See export credit insurance.
What Banks Look For
- A track record of exports and payments
- Confirmed orders or LCs from credible buyers
- Financial statements and tax records
- A clear export business plan — see export business plan
- Collateral, depending on the facility
- Good compliance and documentation records
Comparing Options
| Option | Timing | Typical requirement |
|---|---|---|
| Buyer advance | Before production | Buyer agreement |
| Packing credit | Before shipment | Confirmed order or LC |
| LC discounting | After shipment | Usance LC with compliant documents |
| Invoice finance | After shipment | Receivables, buyer quality |
| Forfaiting | After shipment | Usually bank-guaranteed receivables |
Manage Finance Costs
Finance has a cost, and it belongs in your pricing. Include interest and fees for the expected financing period in your export costing sheet. Where possible, negotiate deposits and shorter payment terms to reduce the need for finance in the first place.
Frequently Asked Questions
What is pre-shipment finance?
Pre-shipment finance is funding provided before goods are shipped, typically to buy raw materials and produce an export order, often secured against a confirmed order or LC.
Does SBP offer export finance schemes?
The State Bank of Pakistan has operated export refinance schemes through commercial banks, and the terms have changed over time. Ask your bank which schemes are currently available.
Can I get finance against an LC?
Yes. Banks may offer pre-shipment finance against an LC, and post-shipment finance by discounting or negotiating usance LCs once compliant documents are presented.
Want Safer Terms on Your Next Deal?
Hexaco Global helps exporters structure quotations, payment terms, and documentation so deals close without putting your cash at risk. Tell us about your buyer — we reply within 24 hours.
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