Pre-shipment finance: making the export order before the buyer pays

Why would a good export order need funding?

A big export order is good news with a catch. The buyer wants the goods made to their specification, packed for their market and delivered to a port on a set date. They’ll pay — but usually not until the goods have shipped, arrived or been checked, and often on terms after that. You carry every cost of making the order until then.

For a small manufacturer or producer, an order two or three times larger than usual can need more cash than the business has on hand. Turning it down protects the bank balance but loses the customer. Pre-shipment finance is how exporters say yes.

What costs come before shipment?

Cost	When it hits
Raw materials and components	At or soon after order confirmation
Production wages and overtime	Throughout production
Subcontracted processes	As work is completed
Packaging, labels and market-specific compliance	Before packing
Inspection, testing and certification	Before shipment, if the buyer or market requires it
Cartage to port and export paperwork	In the days before shipment

business.gov.au notes that most goods valued over $2,000 need an export declaration before they can be exported, and some goods need permits. Your forwarder or broker generally lodges the declaration, and their fee is part of your pre-shipment cost.

How do lenders assess pre-shipment funding?

Because the goods don’t exist yet, lenders are really assessing whether you can make them and whether the buyer will pay. Expect questions about:

• The order — purchase order or contract, value, delivery date, specification.
• The buyer — who they are, your history with them, and their payment track record.
• The payment method — payment in advance, letter of credit, documentary collection or open account.
• Your capacity — can you produce this volume on time, with your current staff and equipment?
• The business — bank statements, turnover, existing debts and ATO position (considered case by case).
• Security — property can support larger amounts.

A letter of credit from a reputable bank or trade credit insurance on the buyer can strengthen the picture, because they reduce the chance the receivable goes bad.

Which facilities fit pre-shipment needs?

Facility	Suits
Line of credit	Exporters with a regular flow of orders
Working-capital loan	A single large order with a clear repayment point
Property-secured loan	Large contracts or several orders at once
Export Finance Australia	Eligible exporters, including export supply chains

Unsecured and line-of-credit options typically run from $5,000 to $500,000, sized on turnover and bank statements. Property-secured loans run from $20,000 to $5,000,000. If you’ve got an order in hand and want to know what’s realistic, make a quick enquiry — no credit check involved.

How do I make the funding match the order?

The mistake to avoid is funding production and then running dry during the wait for payment. Map the whole cycle:

1. Pre-shipment — the costs above, from order to loading.
2. Transit — no new costs, but no income.
3. Payment terms — the buyer’s credit period, from whatever trigger the contract uses.
4. Conversion — the money arrives and converts at the day’s exchange rate.

If you size the facility for step 1 only, you’ll hit a second crunch at step 3. A revolving line of credit handles both stages; a one-off loan needs a term long enough to cover them. See export working capital for the full picture.

What if production runs late?

Late production pushes shipment, and therefore payment, later. It can also breach a letter of credit’s latest shipment date, which puts the bank’s undertaking at risk until the credit is amended. Build slack into your schedule, keep the buyer informed early, and check any letter of credit’s dates the day it arrives — not the week you ship.

Illustrative example

Illustrative only. A small furniture workshop wins an order from an overseas hotel group worth $210,000, payable by letter of credit at sight on presentation of documents. Timber, hardware and finishes cost about $70,000 up front; wages and subcontracted upholstery another $60,000 over ten weeks; crating, cartage and export paperwork about $12,000. The workshop funds the $142,000 of pre-shipment costs with a facility sized to the order. When the documents are presented and paid under the letter of credit, the facility is repaid.

What about duty on imported inputs?

If you imported components that go into goods you later export, the ABF’s duty drawback scheme can refund customs duty paid on them. The ABF says claims can be made within four years of export for most goods, with a minimum claim of $100. The Tradex scheme is another route: it gives an upfront exemption from customs duty and GST on goods imported for re-export or as inputs to exports. Both are worth asking your broker about.

What should I have ready before I ask?

You don’t need anything formal to enquire, but a clear picture speeds things up:

• the purchase order or contract, with value, delivery date and payment terms
• a simple production budget — materials, labour, packaging, freight to port
• a timeline from order confirmation to shipment and payment
• recent business bank statements
• details of any letter of credit or trade credit insurance
• whether you own residential or commercial property

With those in hand, a real person can quickly tell you what’s realistic and what the next steps would be.

Say yes to the order

If you’ve won an export order and need help producing it, start a Trade Loan enquiry. It’s quick, there’s no credit check to ask, and your details aren’t circulated to a list of lenders. A real person will call to understand the order, the buyer and your production timeline. Accurate information about the order value and payment method helps us match you properly from the start.