Supply Chain Finance check0 / 1 answered · 0 correct
Check 1
Why can pre-shipment finance be riskier than financing an accepted bank obligation?
Inventory and Pre-Shipment Finance
Funding before the buyer has paid — where control of goods becomes important.
Pre-shipment need
Suppliers may need cash to buy raw materials, manufacture or prepare goods before shipment and invoice maturity.
Inventory control
Warehouse control, collateral management, borrowing bases and stock reporting can support financing depending on the product.
Performance risk
Before shipment, the financier may be exposed to the supplier’s ability to actually produce and deliver goods.
Exit
Repayment usually depends on sale proceeds, a later receivable, LC proceeds or another clearly identified source.
Standards / source note: Supply-chain-finance terminology is guided by the Global Supply Chain Finance Forum definitions, while the actual legal, credit and operational structure remains transaction-specific.
Remember thisPre-shipment finance takes production/performance risk that may not exist after a clean receivable is created.
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