Export Packing Credit Explained: Pre-Shipment Working Capital for Indian Exporters

What is export packing credit?

Export packing credit is a pre-shipment facility that funds the production and packaging of a confirmed export order. It is the working-capital engine of export manufacturing: you draw funds to buy raw materials and pay production costs before goods leave India, and you repay from the export proceeds once the shipment is paid for.

Unlike post-shipment products that react to a shipped invoice, packing credit is proactive — it lets you take on orders you could not otherwise fund. That makes it the natural first facility for manufacturers, processors and traders with confirmed order books.

How export packing credit works

The facility is linked to a confirmed order or LC, drawn as you need it, and repaid from proceeds.

1. Secure a confirmed export order or LC from your buyer.
2. Approach your bank with the order, your export history and documents.
3. The bank sanctions a packing credit limit linked to the order value.
4. Draw the funds to pay for raw materials, production and packaging.
5. Ship the goods; the credit is repaid from export proceeds or rolls into post-shipment finance.

The limit is usually tied to the order value, so the bank can see exactly what the money is funding and when the repayment source arrives.

What packing credit can fund

• Raw materials and inputs for the export order.
• Processing, finishing and packaging costs.
• Transport and logistics up to the port of shipment.
• Quality testing and documentation where they are part of the order.

The guiding rule is that the funded costs lead to the shipped export — spending unrelated to the order falls outside the facility.

Costs and rates

Packing credit is priced as interest on the drawn amount, usually on a running basis. Indicative pricing in the Indian market sits in the low-to-mid teens per annum ⚠️, with concessional treatment under some export credit programmes — treat these as ranges, not quotes.

Packing credit vs post-shipment finance

Packing credit covers the period before shipment; post-shipment finance covers the wait for payment after. They are complements, not substitutes — production cash comes from packing credit, and fast payment after shipment comes from factoring or LC discounting. See the full stage-by-stage map in our export financing guide.

How to apply

• Confirmed export order or LC from your buyer.
• Your IEC (Import Export Code) and company / GST registration.
• Export history and recent shipping documents (for limit sizing).
• A clear cost build-up of what the facility will fund.
• The bank’s sanction documents and security requirements.

Exporters with a clean track record and real orders typically move from first sanction to repeat facilities quickly. If your buyer’s country supports factoring or LC discounting, you can pair packing credit with a post-shipment product for a full cycle.

Packing credit limits and security

Banks size packing credit against the order, not against your balance sheet alone. The limit is usually a percentage of the confirmed order or LC value, and the drawn amounts are expected to trace to production costs for that order.

• Security is typically the export receivables and the LC / order, not fixed-asset collateral.
• Drawings must be used within the sanctioned period and tied to the order.
• After shipment, the facility converts to post-shipment finance rather than being repaid in cash.
• Unexpired or misused portions attract higher rates, so keep the utilisation aligned to the order.

Treat the facility as a cycle: draw for the order, ship, convert to post-shipment, clear from proceeds. That rhythm keeps the facility cheap and repeatable.

Frequently asked questions