Names and identifying details in this case study have been changed. The structure, the numbers and the sequence are as they happened.
The requirement
A plastics processor had been approved as a vendor for a large FMCG customer, conditional on installing a specific European line. The machine cost roughly ₹6 crore landed. The supplier's terms were an advance on order and the balance before shipment — normal for that manufacturer, and impossible for this buyer.
The problem with funding it as one loan
A straight term loan would have released money to the buyer, who would have remitted it abroad and then waited months for the machine to arrive, be installed and be commissioned. The company would have been paying interest, and eventually instalments, on an asset that was still in transit.
What we structured
- A letter of credit in favour of the overseas supplier, payable against shipping documents, so the supplier had certainty without the buyer funding the purchase
- A term loan that took over the liability when the LC devolved on presentation of documents
- A moratorium covering ocean transit, installation and trial runs, so repayment began after commercial production
- Margin met from the company's own funds, kept deliberately modest so working capital was not drained at the same time
The outcome
The machine shipped on schedule, was commissioned in the following quarter, and the customer's programme started on time. The first instalment fell due after the line was producing.
What this case shows
An import is a sequencing problem as much as a funding one. The supplier needs certainty of payment; the buyer needs to avoid paying for an idle machine. A letter of credit and a term loan together solve both, and neither does it alone.
It is also worth saying what made the case fundable at all: an approved-vendor status with a named customer. Capacity bought with no visibility of the order that justifies it is the hardest case in manufacturing, and we say so.