Shipment splits trade finance in two: before it, lenders fund production; after it, they fund the invoice
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Ossiano Guides · Getting paid
Pre-shipment finance rests on the seller's ability to perform, post-shipment finance rests on the buyer's promise to pay, and at shipment the security moves from goods in production to the receivable.
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01 · The dividing line
Shipment changes what the lender is financing
The Global Supply Chain Finance Forum (GSCFF) defines as a loan to a seller for sourcing, manufacturing or converting materials into finished goods or services that are then delivered to a buyer. Its security covers work in progress and finished goods before shipment, and the receivables following shipment.
That handover is where begins. Upon shipment, the GSCFF notes, the finance provider may offer post-shipment finance such as or . In the GSCFF techniques index, pre-shipment finance sits under Loans, beside loan or advance against receivables.
"Upon shipment, the finance provider may offer post-shipment financing"
Global Supply Chain Finance Forum, Standard Definitions, Pre-shipment Finance, 2016
Figure 1 · Interactive
One order, two kinds of finance
Tap Before shipment or After shipment. The shipment step is where security moves to the invoice.
Source: Global Supply Chain Finance Forum, Standard Definitions, pre-shipment finance (2016) and factoring (revised October 31, 2024) pages.
02 · Pre-shipment tools
Pre-shipment finance goes by several names and often runs to the buyer's payment date
The GSCFF lists purchase order finance, and contract monetization financing as other names for pre-shipment finance. Its variations include finance against red and green clause letters of credit; a lets the seller draw an advance before shipment.
The maturity is agreed between the seller and the finance provider and is often tied to the date on which the buyer will pay, the GSCFF says. For a transaction-specific loan, the US International Trade Administration's Trade Finance Guide says the is generally up to one year, or a period matching a specific export project.
Pre-shipment finance is most commonly provided on , according to the GSCFF. Repayment may also come from a documentary credit, a standby letter of credit or a Bank Payment Obligation.
Commodity trade uses the same pattern. The International Finance Corporation disclosed in July 2024 a syndicated term loan to SUCDEN for the procurement and export of cocoa beans in Cote d'Ivoire, with a 1-year maturity renewable annually for up to 4 years.
Instrument cards: Purchase order finance; Pre-export finance; Red clause letter of credit; Trade loan.
03 · Post-shipment tools
After shipment, the invoice's term sets the choice of tool
In , after verifying the invoice the finance provider advances a percentage, usually around 80%, of its value to the seller, according to the GSCFF. The ITA notes that factoring generally does not work with foreign receivables on terms of more than 180 days.
Receivables discounting lets sellers sell individual or multiple invoices to a finance provider at a discount, and it may be disclosed to the buyer or kept confidential, the GSCFF explains.
For longer terms, is the without recourse purchase of future payment obligations, in the GSCFF definition. The ITA places it on medium and long-term credit of 180 days to seven years or more, with 100 percent financing of contract value.
Figure 2
Tools on each side of shipment, with their usual terms
Read down the stage column. Terms are as the official sources state them.
Sources: US International Trade Administration, Trade Finance Guide, July 2022; Export-Import Bank of the United States, Export Finance Solutions Guide, March 20, 2026, and Medium-Term Export Credit Insurance, February 18, 2026.
Instrument cards: Factoring; Invoice discounting; Forfaiting.
04 · Risk shifts at shipment
The lender's exposure moves from the seller's performance to the buyer's payment
Before shipment, the primary risk is the of the seller, according to the GSCFF. The goods have to be made and shipped before there is an invoice to collect.
The source of repayment is usually the flow of sales proceeds from the buyer, the GSCFF adds. Once the invoice exists, the buyer's payment becomes the anchor. In non-recourse factoring, the finance provider normally pays 100% of credit covered receivables if the buyer defaults, according to the GSCFF factoring page.
Export credit insurance can reach back before shipment as well. The Export-Import Bank of the United States (EXIM) says pre-shipment cover under its Single Buyer Insurance is typically 95 percent.
05 · Government support on both sides
Export credit programs support both the production stage and the receivable
Before shipment, EXIM's covers 90% of the bank loan, including principal and interest, and only the lender can apply, according to the EXIM Export Finance Solutions Guide of March 20, 2026. EXIM authorized USD 1,083.7 million of Working Capital Guarantees across 101 authorizations in fiscal 2025, its Annual Report 2025 shows.
After shipment, EXIM is a one-year renewable policy that generally covers terms of up to 180 days at 95 percent, the same guide says. For capital goods on longer terms, EXIM supports credit terms of 1 to 5 years, in some cases up to 10, according to its product sheet of February 18, 2026.
Development banks work on both sides too. In March 2019 the EBRD provided a US$20 million trade facilitation facility to UzPromstroybank, with up to 50 percent of the limit available as cash advances for pre-export and post-import financing.
06 · Worked example
The shipment advance can repay the production loan and still leave cash for the exporter
The calculator follows one illustrative order through both stages. A pre-shipment loan funds production. At shipment, an advance against the invoice repays that loan and its interest, and the rest goes to the exporter. When the buyer pays, the provider keeps the advance and its charge and releases the balance, following the GSCFF handover from goods to receivable.
With the default settings, a US$1,000,000 order with US$600,000 drawn for 90 days at 7.00% and an 80% advance for 60 days at 6.50%, the exporter receives $189,500.00 at shipment and $191,333.33 when the buyer pays. The total finance cost is $19,166.67, or 1.92% of the order, over 150 days financed end to end. The 80% default sits near the GSCFF's usual factoring advance of around 80%.
Figure 3 · Try it
Finance one order from production to payment
Move the sliders. The shipment advance repays the production loan first.
Days to shipment
Post-shipment advance, percent of invoice
Days to buyer payment
Cash to the exporter at shipment
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Balance at buyer payment
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Total finance cost
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Our Research Desk used simple interest on a 360-day year for each stage: each stage's charge equals the amount outstanding x annual rate x days / 360. The post-shipment advance repays the pre-shipment loan and interest at shipment; the buyer's payment repays the advance and its charge, and the rest goes to the exporter. The rates shown are for illustration and are not Ossiano pricing.
This calculator explains the concept only. Advance levels, rates and terms vary by exporter, buyer, product and country.
07 · Ossiano view
One order can be financed end to end
OBSERVATION 01
The handover is designed in
The GSCFF describes the provider moving from pre-shipment security to the receivable and offering post-shipment finance on shipment. A single provider relationship can cover the full cycle.
OBSERVATION 02
Each stage has its own risk anchor
Seller performance anchors the pre-shipment stage; the buyer's sales proceeds anchor repayment after it. Structures match each risk to the stage where it sits.
OBSERVATION 03
Term ranges cover short and long cycles
Official sources span transaction loans of up to one year, factoring up to 180 days and forfaiting to seven years or more.
Summary
Pre-shipment finance funds the seller's performance; post-shipment finance funds the buyer's promise
Pre-shipment finance is a loan to a seller to source, manufacture or convert materials into goods for a buyer, and its primary risk is the seller's performance. Security covers work in progress and finished goods before shipment and the receivables after it. On shipment, the provider may offer post-shipment finance such as receivables discounting or payables finance.
Post-shipment tools follow the invoice's term: factoring usually for terms up to 180 days, and forfaiting for 180 days to seven years or more. Export credit agencies such as EXIM support both stages, with a Working Capital Guarantee before shipment and export credit insurance after it.
Related guides: Receivables finance; Pre-export finance; Forfaiting; Trade credit insurance; The cash conversion cycle; Tenor explained; Trade Finance Glossary.
Instrument cards: Purchase order finance; Pre-export finance; Red clause letter of credit; Factoring; Invoice discounting; Forfaiting; Trade loan.
For questions on how these shifts affect existing or planned trade finance exposures, contact the Ossiano Research Desk.
Sources
- US International Trade Administration, Trade Finance Guide: A Quick Reference for U.S. Exporters, July 2022. Supports: transaction-specific export working capital loans generally up to one year (Chapter 8); factoring generally not used for foreign receivables over 180 days; forfaiting on terms of 180 days to seven years or more, with 100 percent financing of contract value (Chapter 11).
- Export-Import Bank of the United States, EXIM Export Finance Solutions Guide (EBK-EFSG-26-03-20), March 20, 2026. Supports: Working Capital Guarantee covers 90% of the bank loan, principal and interest, lender applies; short-term export credit insurance, one-year renewable policy generally covering up to 180-day terms at 95 percent.
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance: Pre-shipment Finance, 2016. Supports: definition; security before and after shipment; post-shipment finance on shipment; synonyms and variations; maturity tied to buyer payment; open account and other repayment sources; performance risk of the seller; repayment from the buyer's sales proceeds; the Figure 1 pre-shipment steps; the quote in section 01.
- Global Supply Chain Finance Forum, Techniques index, 2016. Supports: pre-shipment finance listed under Loans.
- Global Supply Chain Finance Forum, Factoring, October 31, 2024. Supports: notice of assignment; advance usually around 80% of invoice value; settlement on the due date; non-recourse cover of credit covered receivables; the Figure 1 post-shipment steps.
- Global Supply Chain Finance Forum, Receivables Discounting, October 31, 2024. Supports: definition; disclosed or confidential discounting.
- Global Supply Chain Finance Forum, Forfaiting, October 31, 2024. Supports: definition of forfaiting as a without recourse purchase of future payment obligations.
- Export-Import Bank of the United States, Single Buyer Insurance, undated. Supports: pre-shipment cover typically 95 percent.
- Export-Import Bank of the United States, EXIM Annual Report 2025, undated (fiscal year ended September 30, 2025). Supports: 101 Working Capital Guarantee authorizations totaling USD 1,083.7 million in fiscal 2025 (page 16).
- European Bank for Reconstruction and Development, EBRD supports trade in Uzbekistan, March 21, 2019. Supports: US$20 million facility to UzPromstroybank; up to 50 percent of the limit as cash advances for pre-export and post-import financing.
- Export-Import Bank of the United States, EXIM Medium-Term Export Credit Insurance (EBK-MEDT-26-02-18), February 18, 2026. Supports: credit terms of 1 to 5 years, in some cases up to 10.
- International Finance Corporation, IFC project disclosure: SUCRES ET DENREES (SUCDEN II), project 50076, July 31, 2024. Supports: syndicated term loan for the procurement and export of cocoa beans in Cote d'Ivoire; 1-year maturity, renewable annually for up to 4 years.
- Alternative Reference Rates Committee, SOFR "In Arrears" Conventions for Syndicated Business Loans, July 22, 2020. Supports: Actual/360 as the standard US money market day count, used in Figure 3.
- Board of Governors of the Federal Reserve System, Selected Interest Rates (Daily), H.15, September 29, 2026. Supports: money market rates annualized on a 360-day year, used in Figure 3.
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