Under these credits the seller is assisted by receiving an advance befor acquiring goods or despatching them. Under this, there are RED CLAUSE and GREEN CLAUSE credits.
Red Clause Credits bear a clause in RED authorizing negotiating bank to make an advance to the seller prior to shipment and tender of documents. The advance will be liquidated from the proceeds of the bill negotiated. This advance is granted against exporters undertaking to tender documents in terms of credit within the validity.
Green clause credits in addition to permitting preshipment advance also entail sorting of goods in the name of the bank. Green clauses arc extensively used in Australian wool credits.