Loan for Import Export Business in India

India is the fastest-growing large economy in the world, and it exports billions of dollars worth of goods and services to several nations every year. Through several campaigns like “Make in India” and initiatives to encourage the establishment of export businesses in India, the Indian government is actively promoting Indian exports. Import and export are always seen as the two halves of the same coin, although they are both included under the same heading. The import-export industry involves domestic and foreign businesses purchasing and selling goods and commodities.

Following are the 5 Methods for Financing an Import Export Business in India

1. Payment in Advance – This is also referred to as “cash in advance,” while it isn’t strictly an import finance strategy. Here, the importer only makes an advance payment to the exporter for the goods. The benefit of this approach is that it is easy to understand. The drawback is that the importer bears all the risk (what if the items are subpar?) and uses up a significant portion of the seller’s working capital, which can impede the business from growing and even cause cash flow issues.
2. Letters of Credit – One of the most popular trade finance tools is the letter of credit. An LC is an agreement formed by a financial institution on behalf of the importer that is legally binding and irrevocable and guarantees payment for the goods as long as specified conditions are followed. This way, the exporter takes on the importer’s credit risk rather than the banks. The advantages of employing LCs include their widespread acceptance and a great degree of adaptability. Even though simple import/export transactions only require the “basic” LC, the conditions of LCs can be altered to accommodate a variety of transaction types. The importer may also include safety nets in the LC, such as requirements for delivery, quality, and other factors like payment terms.
3. Cash Against Documents (CAD) – CAD is an additional type of advance payment in which the importer is still required to pay for the products before getting them. In CAD financing, a third party (such as a bank) holds the shipment and title documentation, which only releases the products to the importer after complete payment. An escrow account could be used as an example.
4. Business Loans – A straightforward company loan is an easier way to finance imports. Its operation is apparent; thus, there isn’t much to say about it. However, the benefits are also clear because the importer can pay the exporter immediately after the loan is disbursed. Additionally, there should be ample time to sell the products before repayment, depending on the loan’s term.
5. Private Resolution – You can do a single payback 60 to 120 days after you accept the items, allowing you adequate time to stock and sell them. We charge fair interest rates and don’t use your goods as collateral or take anything away from your everyday sales. Additionally, using our financing option has no impact on your credit score.

Documents Required to Avail a Loan for Import-Export Business

1. Passport size photo
2. Business strategy
3. KYC records for the owners, partners, and co-applicants(if Any)
4. PAN cards for the partner, business, and applicant
5. Certificate proving company registration
6. Information on the bank’s current account, ITR, and sales tax
7. Evidence of freight forwarding companies hiring
8. IEC or Import Export Code
9. The Exports Promotion Council (EPC) issues the exporter a registration and membership certificate
10. Certified and Audited Financials by CA
11. Business Address Proof
12. Documents showing income proof and declaration documents

* IEC stands for the import-export license that the Indian government has granted. The Director-General of Foreign Trade (DGFT), Department of Commerce, issued the 10-digit code.