Packing Credit Limit

Packing Credit Limit

Understanding Packing Credit Limit

Packing Credit Limit is a loan given to an exporter for the purpose of financing the acquisition, processing, manufacturing, or packing of products before shipment. To enterprises engaged in export or services, packing credit can be granted as working capital assistance to cover expenses such as payroll, utilities payments, travel expenses, and so forth.

Features of Packing Credit Limit

• This facility aims to provide exporters with short-term working capital financing at internationally competitive interest rates.
• Exporters can borrow the money, use it to meet their capital requirements, and then pay it back with interest once the buyer has paid in full.
• In comparison to other types of credit, such as Overdraft, banks charge a reduced rate of interest on Packing Credit loans.
• Packing credit loans have variable terms, with banks requiring repayment once the buyer has made the final payment to the supplier.
• When the finished product is manufactured and ready to ship, exporters can apply for this financing.

 

Eligibility Criteria

Any recognized bank in the country can offer a packaging credit loan to an exporter who has obtained a confirmed export order from a buyer or an irrevocable Letter of Credit (LC). If the exporter does not have a copy of the order receipt, the bank may issue a Packing Credit based on previous communications with the buyer. It must, however, include vital information such as the description of the items, the quantity of the product, the buyer's name and other information, and so on. In addition, when the exporter obtains the LC or export order at a later date, he must send it to the bank.