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What is packing credit? Importance, features, types, examples, and how it works
Packing credit is a type of pre- and post-shipment finance that helps exporters fulfill their orders. Learn more about its process, types, and features in this blog.
For Indian exporters looking to expand globally, access to timely, affordable trade finance can be a game-changer. Delays or cash flow challenges can increase the upfront costs, discouraging sellers from expanding their export business. Packing credit, or export packing credit, provides short-term financing that addresses these challenges. It can help sellers cover the cost of raw materials, production, and packaging before overseas payments arrive.
This blog explains what packing credit is, its importance, features, types, examples, process, eligibility, documentation, and interest rates. It also outlines the difference between export packing credit and a letter of credit.
This blog explains what packing credit is, its importance, features, types, examples, process, eligibility, documentation, and interest rates. It also outlines the difference between export packing credit and a letter of credit.
What is export packing credit?
Export packing credit is a short-term financing option offered by banks and other financial institutions to exporters. Although packing credit is commonly referred to as pre-shipment finance, it covers a wide range of expenses throughout the export process and is typically repaid when the goods are delivered, and the buyer pays the exporter.
Export packing credit helps finance various business expenses, particularly the purchase, processing, manufacturing, or packing of goods prior to shipment. It can also include expenses to cover raw materials, wages, and post-shipping expenses like storage and transportation costs. This credit is especially beneficial for small businesses which often struggle to secure necessary funding at different stages of the export process.1
Export packing credit helps finance various business expenses, particularly the purchase, processing, manufacturing, or packing of goods prior to shipment. It can also include expenses to cover raw materials, wages, and post-shipping expenses like storage and transportation costs. This credit is especially beneficial for small businesses which often struggle to secure necessary funding at different stages of the export process.1
Importance of packing credit
Packing credit plays a pivotal role in enabling Indian exporters to fulfill international orders on time. It:
● Ensures smooth pre-shipment operations: Exporters can purchase raw materials, hire labor, and manage production without worrying about cash flow disruptions.
● Improves competitiveness: Access to low-cost pre-shipment financing allows exporters to quote better prices in global tenders.
● Supports timely delivery: With funds readily available, exporters can avoid production delays and meet agreed upon shipping deadlines.2
Features of packing credit
A packing credit facility offers several key features that make it a highly attractive option for exporters in India. These features are designed to provide flexibility and financial efficiency.
Short-term financing
Packing credit is generally a short-term loan and is repaid according to the export cycle. This enables exporters to refinance the credit quickly upon receiving customer payments, minimizing long-term debt impacts.
Competitive interest rates
Packing credit is offered at low interest rates by banks and financial institutions, making it attractive to exporters. Interest rates may vary based on the credit market, the lender, and the exporter’s creditworthiness.
Flexible repayment terms
Packing credit allows exporters to repay the amount in installments according to a set schedule. This also eases the financial burden on exporters.3
Types of packing credit
There are two common types of packing credit:
Pre-shipment packing credit:
Pre-shipment packing credit is provided to exporters before the goods are shipped. It helps cover costs associated with production, processing, and packaging of goods. The credit can be used to purchase raw materials, pay for labor costs, and cover transportation expenses.
Post-shipment packing credit:
Post-shipment packing credit is provided to exporters after the goods have been shipped. It helps cover working capital requirements of the exporter until payment is received from the buyer.4
How does packing credit work?
Here’s how packing credit works:
Application and order assessment:
Exporter submits a formal request for packing credit to the bank. A bank executive visits the exporter’s facility to verify the export order and assess its value. Once verified, the bank opens a dedicated packing credit account for the exporter.
Fund disbursement:
The bank issues credit — either covering a portion or the full value of the invoice — based on the assessed risk. The disbursement may be in Indian rupees or a readily convertible foreign currency, as mutually agreed between exporter and bank.
Utilization of funds:
The exporter utilizes the funds for activities such as procuring raw materials, processing, manufacturing, and packaging to prepare goods for export.
Repayment and closure:
Once the seller receives payment from the overseas buyer, the bank uses it to clear the packing credit account. This repays the loan and closes the facility.
Packing credit example
Suppose an Indian textile exporter receives a confirmed order worth $100,000 from a US buyer. The order requires purchase of raw cotton, dyeing, stitching, and final packaging before shipment. The exporter approaches a bank for export packing credit of ₹50 lakhs. The bank sanctions the amount for 120 days at a concessional interest rate. The exporter completes production and ships the goods within 90 days. Upon receiving payment from the buyer, the exporter repays the bank.
Eligibility criteria for packing credit
The eligibility criteria for packing credit may vary depending on the policies of the lending institution. Some common factors to be considered are:
● The exporter must have a valid export order or a letter of credit from a reputable importer.
● The exporter must be registered with relevant authorities, such as the Reserve Bank of India or the Directorate General of Foreign Trade (DGFT).
● The exporter must have a good credit rating and a positive track record of exporting.
● The exporter must have all necessary export documents.7
Documents required for export packing credit
Banks require a set of documents before sanctioning packing credit:
● Copy of confirmed export order or LC
● IEC certificate
● PAN and GST registration
● Manufacturing license (if applicable)
● Past export performance records8
● IEC certificate
● PAN and GST registration
● Manufacturing license (if applicable)
● Past export performance records8
Get documentation assistance on Export Navigator
Export Navigator is a one-stop dashboard that provides Indian exporters with guidance on compliance across five key areas — export registration, product documentation, shipping documentation, tax documentation, and payment reconciliation. Exporters can use the dashboard to understand regulatory requirements for their business and get end-to-end support from third-party service providers to obtain the necessary documents. Export Navigator is available to all Indian exporters, including those not registered on Amazon.
How to apply for packing credit
Here’s how sellers can apply for packing credit:
Step 1: Secure a confirmed export order
Once an exporter receives a confirmed export order from a buyer, they should formally approach their bank to apply for packing credit. The bank will request documentation related to the company and the specific export order.
Step 2: Submit documents and undergo verification
The exporter submits the required documents. The bank evaluates the credibility of these documents and determines an appropriate credit limit — typically up to 20-25% of the exporter’s annual sales.
Step 3: Set up order-specific loan accounts
If multiple export orders are involved, the bank creates separate loan accounts for each order. Interest begins accruing once the funds are sanctioned.
Step 4: Receive phased disbursement
The bank may require a breakdown of expenditure in phases and release the approved credit amount in stages, aligning with the exporter’s production or shipment needs.9
Packing credit vs letter of credit
Feature
Packing credit
Letter of credit
Purpose
Financing option available for exporters
Payment guarantee from buyer’s bank to the seller
Timing
Typically, before shipment
At or after shipment
Issued by
Exporter’s bank
Buyer’s bank
Repayment
From export proceeds
Not applicable; acts as payment assurance11
Conclusion
Packing credit is a handy financing option for Indian exporters, enabling them to meet pre-shipment expenses efficiently. By offering timely and affordable working capital, it enhances competitiveness in global trade and helps maintain consistent delivery timelines. Understanding the use of packing credit can simplify export financing for Indian sellers looking to go global.
Amazon Global Selling: Easy e-commerce exports and hassle-free shipping
If you are a business owner and you want to sell your products to the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18 Amazon global marketplaces. As an e-commerce export program, Amazon Global Selling provides support and guidance at every step of your export journey, connecting you to Amazon’s Service Provider Network for tailored compliance, payments, and logistics support.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Frequently Asked Questions
1. Who can avail of packing credit?
Exporters and parties involved in trade can avail of packing credit.
2. Who can provide packing credit to exporters?
Banks and financial institutions can provide packing credit to exporters.
3. How can you calculate packing credit limit?
Packing credit limit is usually calculated based on the exporter’s past performance and creditworthiness.
4. Can packing credit be liquidated?
Yes, packing credit can be liquidated once the goods are shipped and payment is received.
5. What is the packing credit limit?
The packing credit limit is defined as the maximum amount of pre-shipment credit that is available to an exporter by a banker or financial institution, depending on their credit standing and the value of their confirmed export order.
6. What is the repayment process for packing credit?
Repayment is made from the export proceeds received from the overseas buyer. Once the buyer makes the payment, the exporter uses these funds to settle the packing credit loan with the bank.
Published on July 29, 2023.
Updated on September 25, 2025.
Sources:
1. https://www.bajajfinserv.in/export-packing-credit
2. https://www.credlix.com/blogs/how-does-packing-credit-work-in-export
3. https://www.bajajfinserv.in/export-packing-credit
4. https://www.tradefinanceglobal.com/trade-finance/pre-post-shipment-trade-finance/
5. https://www.kredx.com/kredxplore/packing-credit#types-of-packing-credit
6. https://www.dripcapital.com/en-in/resources/finance-guides/packing-credit-in-exports
7. https://www.credlix.com/blogs/how-does-packing-credit-work-in-export
8. https://www.bajajfinserv.in/export-packing-credit
9. https://www.dripcapital.com/en-in/resources/finance-guides/packing-credit-in-exports
10. https://www.dripcapital.com/en-in/resources/finance-guides/packing-credit-in-exports
11. https://www.credlix.com/blogs/how-does-packing-credit-work-in-export
Updated on September 25, 2025.
Sources:
1. https://www.bajajfinserv.in/export-packing-credit
2. https://www.credlix.com/blogs/how-does-packing-credit-work-in-export
3. https://www.bajajfinserv.in/export-packing-credit
4. https://www.tradefinanceglobal.com/trade-finance/pre-post-shipment-trade-finance/
5. https://www.kredx.com/kredxplore/packing-credit#types-of-packing-credit
6. https://www.dripcapital.com/en-in/resources/finance-guides/packing-credit-in-exports
7. https://www.credlix.com/blogs/how-does-packing-credit-work-in-export
8. https://www.bajajfinserv.in/export-packing-credit
9. https://www.dripcapital.com/en-in/resources/finance-guides/packing-credit-in-exports
10. https://www.dripcapital.com/en-in/resources/finance-guides/packing-credit-in-exports
11. https://www.credlix.com/blogs/how-does-packing-credit-work-in-export
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