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Preface to Book This Guide is intended for exporters who are traders and manufacturers and who need to approach a bank, or financial institution, for short-term credit. It is specially aimed at relative newcomers to the business world in the developing countries, in particular to the world of international trade. A exporter, who imports raw materials, other in put sand spares to manufacture products for export, will need to pay overseas suppliers and to receive payments from abroad. In many cases, such payment can only be obtained after two or three months, or even longer. This can put a strain on the entrepreneur's liquidity. Therefore, he may need money to finance both his export and import transactions. In other words, he will need short-term credit. This Guide will assist the entrepreneur in determining his financial needs, in general. It will look briefly at the payment methods and the related credit facilities available for trade transactions. Then, it will examine the various types of financial institutions that may be able to offer assistance. For those who are not entirely familiar with banks and other sources of finance, this Guide gives useful hints on how to approach a lender for short-term credit. It lists the information an entrepreneur needs to give to a bank and tells him how best to prepare himself to negotiate a loan. The information provided in this Guide mainly concerns the way an institution is to be approached for finance. It deals only briefly with trading and trade finance mechanisms, the reason being that the subject is vast and complex, and the methods and techniques differ from country to country. For further details about financing means and sources, or other export-related subjects, the International Trade Centre (UNCTAD/ WTO (ITC) can provide a number of publications and guides that may be found useful. Most of these are given free of charge (in limited numbers) to public and private trade-related institutions and firms in developing countries and economies in transition. A list of these publications is given in Appendix I. This Guide has been prepared within the framework of the ITC Competitiveness Improvement Programme for SMEs (ProCIP). It is hoped that it will help entrepreneurs to find cost-effective solutions to their financing needs and thereby contribute towards increasing their competitiveness in manufacturing and trading. Entrepreneurs
from the Indian Small Scale Industries (SSIs), which constitute
an important and crucial segment of the industry sector in the country,
will find this Guide very useful. A Small Scale Industrial unit
is defined in terms of investment ceilings on the original value
of the installed plant and machinery. An industrial undertaking
in which the investment in fixed assets in plant and machinery,
whether held on ownership terms or lease or on hire purchase basis
does not exceed Rupees one crore (Rs. 10 million), will be deemed
as small scale industrial unit. This sector accounts for about 40%
of the total industrial output and contributes nearly one third
of the country's total direct exports. The contribution of SSI sector
to employment is next only to agriculture. The Small Scale Sector exhibits an amazingly wide range in terms of size, empolyment, technology and products with over 7,500 products being manufactured by it. Small Scale Industries are not subjected to compulsory licensing. Registration with the State Directorate of Industries is also not mandatory. Registration, however, helps in many ways. For example, registration with State Directorate of Industries helps a unit to obtain all manner of facilities and assistance from Government. In this context, as this Guide covers the subject of trade-related short-term credit in as general a way as possible, for practical reasons, it does not attempt to cover the numerous government or trade-sponsored programmes and incentive schemes setup for the benefit of exporters of non-traditional goods. Further details of relevant schemes could be obtained from bankers, chambers of commerce, trade associations or ministries of commerce and industry. ITC and its network of associated institutions make this Guide available to exporters throughout the world. The associated institutions also provide additional information on local conditions and specific the entrepreneur should contact the following : Small Industries
Development Bank of India Small Industries
Development Bank of India Functional Advisory
Services Section
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