Lalsar Trade & Logistics · Question

How do export finance and forex hedging fit together on one shipment?

Short answer

Export finance funds the cash you need before and after the goods ship. Forex hedging protects the rupee value of the money you will eventually receive. They address different risks on the same order: finance covers the time gap, hedging covers the currency gap. Planning them together means the amount, currency and dates of the loan and the cover match the invoice.

In more detail

Follow one order from start to cash.

When the order is confirmed, you need money to buy material and produce. Pre-shipment finance, often called packing credit, is a bank advance for this, usually in the foreign or local currency depending on the facility. After shipping, documents go to the bank, which may advance funds against them until the buyer pays. This is post-shipment finance.

Meanwhile, the buyer will pay a fixed foreign currency amount on a future date. Between order and receipt, the exchange rate can move and change what you finally earn in rupees. Hedging, usually through a forward contract booked with your authorised dealer bank, fixes the rate for that future date.

Items to match across finance and cover
Item	Why it should match
Currency	Loan, invoice and cover should refer to the same currency
Amount	Cover beyond the invoice creates a separate risk
Date	Cover should fall near the expected payment date
Cancellation terms	Late payment or order cancellation can leave cover open

A spice exporter with one large order

An exporter confirms an order with payment due some weeks after shipment. She raises pre-shipment finance to buy raw material, books a forward cover for the invoice amount and expected date, and repays the advance from the buyer's payment. If the buyer pays late, she speaks to the bank about extending the cover rather than letting it lapse.

Hedge only what is reasonably certain

Covering an order that may be cancelled can turn a protection into a loss-making position. Advice here is general; contracts are executed through your authorised dealer bank.

Whether to hedge fully, partly or not at all depends on margins, buyer behaviour and your appetite for risk.

Key points

Export finance solves a timing gap; hedging solves a currency gap.
Match currency, amount and date between the invoice, the finance and the cover.
Keep cover tied to firm orders, since cancelled orders leave open contracts.
Tell the bank early if payment is likely to be late.
All currency contracts are executed through your authorised dealer bank.

Who this applies to

Exporters taking pre-shipment or post-shipment finance on foreign currency orders.
Finance heads responsible for both bank facilities and currency risk.
Owners wondering whether one arrangement replaces the other.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority. Lalsar Holdings' financial advisory and financing work is advisory and facilitation only. Lalsar Holdings is not a lender. Sanction and disbursement of any credit facility is at the sole discretion of the partner bank, NBFC, or financial institution involved, subject to their own eligibility criteria and credit policy.