Chances are that nice television hanging in your entertainment room was not made in America. During my MBA program I took some courses that focused on the globalization of the world economy. There are many advantages to a global economy such as the free flow of capital and technology from one country to another helps with industrialization which in turn increases the global investment.
Pre shipment finance may have been used to bring that beautiful 52 inch LED Flat Panel to a store near me. Sometimes the term may be referred to as packing credit. A manufacturer of televisions may need working capital to meet the various expenses of the organization before the shipment of goods. The working capital is provided by banks to the exporter prior to the shipment of goods.
Pre shipment financing may be used for any of the following:
-purchase of raw materials to produce or manufacture the goods.
-pay for packaging, labeling or marketing product
-storage facilities until goods are shipped.
-anything to do with the actual cost of shipment of the goods whether it be export documentation, freight charges, or customs.
Companies small and large use this type of financing from banks. One of the caveats is that you and the companies that you do business with need to have good borrowing records with banks. This is important as you are leveraging the contracts to provide your organization with working capital.
Has your organization ever done this type of arrangement or had any experience with any other type of financing to secure capital to ensure there is no disruption in your supply chain?