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Taking on the World
Helping You Succeed in InternationalBusiness
Albert van Eeden
Regional Vice-President Ontario,
Commercial Markets & Small Business
September 17, 2009
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EDC Mandate
Export Development Canada (EDC) is Canada's export credit agency,offering financing, insurance and risk management solutions to help
Canadian exporters and investors expand their international business.
Every year, EDC's knowledge and partnerships are used by more than8,300 Canadian companies and their global customers in up to 200 marketsworldwide. Approximately 80 per cent of EDC's customers are small and
medium-sized businesses.
EDC is a Crown corporation wholly owned by the Government of Canada. The corporation is financially self-sustaining and operates oncommercial principles.
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Authorized Share Capital increased from $1.5bn to $3bn
Contingent Liability Limit Increased from $30bn to $45bn
Canada account limit increased from $13bn to $20bn
Domestic powers
Became law when Parliament passed Budget 2009 on March 12.
Authority to provide financing and insurance services for the Canadian
domestic market for a period of two years.
Government established the Business Credit Availability Program (BCAP)
to guide collaboration between EDC, BDC and the private sector financial
institutions.
EDCs Expanded Financial Flexibility
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Export Development CanadaInsurance Solutions for Canadian Companies
Accounts Receivable Insurance covers your receivables up to 90 per cent of losses resulting from
commercial or political risks.
Single Buyer Insurance covers multiple sales to one customer for six months on contracts worth
up to USD$250,000.
EXPORTProtect covers single export transactions for 90 days worth up to USD$250,000.
Contract Frustration Insurance covers up to 90 per cent of your losses for one export contract.
Political Risk Insurance protects your overseas assets and investments against Transfer &
Conversion, Political Violence, Expropriation, Arbitration Award Default, Non-honouring of a
Sovereign Payment Obligation.
EDC Products and Services
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http://www.edc.ca/english/insurance_accounts_receivable.htmhttp://www.edc.ca/english/insurance_single_buyer.htmhttp://www.edc.ca/edcsecure/exportprotect/epquote.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportprotect/epquote.asp?frompage=&sLang=ehttp://www.edc.ca/english/insurance_contract_frustration.htmhttp://www.edc.ca/english/insurance_political_risk.htmhttp://www.edc.ca/english/insurance_political_risk.htmhttp://www.edc.ca/english/insurance_contract_frustration.htmhttp://www.edc.ca/edcsecure/exportprotect/epquote.asp?frompage=&sLang=ehttp://www.edc.ca/english/insurance_single_buyer.htmhttp://www.edc.ca/english/insurance_accounts_receivable.htm8/11/2019 EDC Presentation
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Example 1 : Accounts Receivable Insurance
CanadianCompany
Foreign
Buyer (s)
$
Insurancepolicy
Canadian bank
Credit facility
Assignment of EDC policy
Payment (inevent of a claim)
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Export Development CanadaBonding Solutions for Canadian Companies
Performance Security Guarantee fully protects your bank in the event of a call on a contractual
guarantee they issued on your behalf.
Performance Security Insurance covers up to 95 per cent of your losses if your customer demands
payment of a bond issued by your bank without valid reason.
Surety Bond Insurance fully protects your surety company in the event of a call on a contractual
guarantee they issued on your behalf.
A Financial Security Guarantee gives your financial institution a guarantee in lieu of collateral so
that you can obtain a letter of guarantee for your suppliers including regulatory bodies, utilities,
etc.
EDC Products and Services
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http://www.edc.ca/english/bonding_performance_security.htmhttp://www.edc.ca/english/insurance_performance_security.htmhttp://www.edc.ca/english/bonding_surety_bond.htmhttp://www.edc.ca/english/bonding_financial_security.htmhttp://www.edc.ca/english/bonding_financial_security.htmhttp://www.edc.ca/english/bonding_surety_bond.htmhttp://www.edc.ca/english/insurance_performance_security.htmhttp://www.edc.ca/english/bonding_performance_security.htm8/11/2019 EDC Presentation
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Example 2 : Performance Security Guarantee
Canadian Bank
CanadianCompany
Buyer
$
Performance Bond
PerformanceSecurity
Guarantee(100%)
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Export Development CanadaFinancing Solutions for Canadian Companies
EXPORT Express Credit is tailored to the needs of small business and provides unsecured loans
of up to $50,000 to help you grow your export business.
Export Guarantee Program gives your financial institution a guarantee to enable you to obtain a
loan to finance your export-related activities or foreign investments.
A Foreign Exchange Facility Guarantee gives your financial institution a guarantee in lieu of
collateral so you can buy a foreign exchange contract to protect against currency fluctuations.
A Financial Security Guarantee gives your financial institution a guarantee in lieu of collateral so
that you can secure an operating line of credit with a foreign bank for your offshore activities.
Loans to Canadian companies and/or their foreign affiliates for working capital or to support
Canadian investments abroad
EDC Products and Services
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http://www.edc.ca/english/financing_export_express_credit.htmhttp://www.edc.ca/english/financing_export_express_credit.htmhttp://www.edc.ca/english/financing_export_guarantee.htmhttp://www.edc.ca/english/bonding_foreign_exchange.htmhttp://www.edc.ca/english/bonding_financial_security.htmhttp://www.edc.ca/english/bonding_financial_security.htmhttp://www.edc.ca/english/bonding_financial_security.htmhttp://www.edc.ca/english/bonding_financial_security.htmhttp://www.edc.ca/english/bonding_foreign_exchange.htmhttp://www.edc.ca/english/financing_export_guarantee.htmhttp://www.edc.ca/english/financing_export_express_credit.htm8/11/2019 EDC Presentation
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Example 3: Export Guarantee Program
Canadian bankExportGuaranteeProgram(50% to 90%)
Credit facility CanadianCompany
Buyer
$
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Example 4: Export Guarantee Program (Foreign investment)
Canadian bankExportGuaranteeProgram(up to 100%)
Acquisition Financing CanadianCompany
Foreignsubsidiary
Acquisition
Local Financing
Foreign bank
Guarantee
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Export Development CanadaFinancing Solutions for Foreign Companies
Loans offer flexible financing options for foreign buyers of Canadian goods and/or services.
Guarantees can be provided when another financial institution is prepared to participate in the
financing of an export sale. We can work with them on a risk-sharing basis.
Lines of Credit can be established for foreign companies intending to buy repeatedly from
Canadian companies. We also have lines of credit established with various foreign financial
institutions worldwide that can on-lend money to buyers of Canadian goods and/or services.
These lines of credit are particularly suitable for smaller transactions.
EDC Products and Services
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http://www.edc.ca/english/financing_foreign_loans.htmhttp://www.edc.ca/english/financing_foreign_guarantees.htmhttp://www.edc.ca/english/financing_foreign_lines_of_credit.htmhttp://www.edc.ca/english/financing_foreign_lines_of_credit.htmhttp://www.edc.ca/english/financing_foreign_guarantees.htmhttp://www.edc.ca/english/financing_foreign_loans.htm8/11/2019 EDC Presentation
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Export Development CanadaOther Resources - available through WWW.EDC.CA EXPORT Check, you can quickly and easily obtain valuable financial and credit information on your U.S. and
foreign customer using our online database covering millions of companies.
Foreign Countries Information
Global Export Forecast, identifies the major forces acting on the world economy and their implications forCanadian exporters. It describes which foreign markets will offer the best opportunities for Canadian exporters for
the coming year, and analyzes the sales outlook by sector. It also discusses the major risks faced by exporters.
Weekly Commentary, each Wednesday, a concise analysis of global issues for Canadian Exporters
Trade Confidence Index
Industry Sector and Commodities Information
Publications & Subscriptions, range of complimentary subscriptions to weekly, monthly and quarterly publications-articles, electronic newsletters and magazines-to keep you current on developments relevant to your industry and
business. More Tools , range of online tools designed to assist Canadian companies whether they are just beginning to
export or are experienced exporters.
If you're just beginning to research exporting:
take a trade-related elearning course;
assess your export-readiness;
discover sources of financing support; or sign up to receive our quarterly ExportWise magazine.
As an experienced exporter, you may want to:
identify the EDC product or service best suited to your needs;
calculate currency conversions on your U.S. or foreign sales; or
EDC Products and Services
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http://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/english/tools_learn.htmhttp://www.edc.ca/edcsecure/exportable/intro.asp?lang=ehttp://www.edc.ca/english/tools_12185.htmhttp://www.edc.ca/english/publications_export_wise.htmhttp://www.edc.ca/edcsecure/onlineadvisor/olaHome.asp?slang=ehttp://www.bankofcanada.ca/en/rates/exchange.htmlhttp://www.bankofcanada.ca/en/rates/exchange.htmlhttp://www.edc.ca/edcsecure/onlineadvisor/olaHome.asp?slang=ehttp://www.edc.ca/english/publications_export_wise.htmhttp://www.edc.ca/english/tools_12185.htmhttp://www.edc.ca/edcsecure/exportable/intro.asp?lang=ehttp://www.edc.ca/english/tools_learn.htmhttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=ehttp://www.edc.ca/edcsecure/exportcheck/ecbridge.asp?frompage=&sLang=e8/11/2019 EDC Presentation
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Case study
ABC Inc. - Manufactures electronic equipment;
Annual Revenue $8.0M;
Bank Line of Credit $2.0M;
New $2.0M contract signed with a buyer in Mexico.
Payment terms:
15% at contract signing; in exchange, an advance payment bond is required;
70% payable net 60 days from receipt of merchandise;
15% payable at commissioning; in exchange, a performance bond is required for a period of 24
months for the Mexican buyer.
Canadian subcontractor will provide the electrical components. Payment terms: Net 60 days.
Chinese supplier will provide the raw material, a 15% deposit, balance settled by irrevocable letter of
credit.
Negative cash flow of $1.0M for nine-month production period.
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Case Study - ABC Inc.
Time
DeliverySign Contract
9 months
Canadian or
foreign
suppliers and
subcontractors
Cash flow
Financing
of work in progress
Risk of
non-
payment
(15 %)
Risk of
non-
payment
(70%)
Currency
conversion
risks
Performance
bond
Buyer
financing
Advance
Payment Bond
Production
Commissioning
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Case Study - ABC Inc
Challenges for the exporter:
Securing more flexible and advantageous payment terms;
Trying to minimize cash outflow at start of production.
Bonds or guarantees are typically carved out of the existing bank working capital facilities
EDC support:
EDC could guarantee up to 50% of yearly purchases from Canadian or foreign suppliers
EDC could cover up to 100% of the advance payment bond required by the supplier
Canadian or
foreign
suppliers and
subcontractors
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Case Study - ABC Inc.
Currency
conversion
risks
Challenges for the exporter:
Protecting the profit margin;
Typically has to provide tangible security in support of bank FX facility
EDC support: EDC could cover 100% of the bank FX facility for a period of 12 months
Guarantee renewable annually
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Case Study - ABC Inc.
Financing
of work in progress
Challenges for the exporter: Access to working capital financing for work in progress;
EDC support:
EDC could guarantee the banks loan or line of credit, or possibly lend directly to ABC
Up to 90% guarantee for loans under $500K and up to 75% guarantee for loans over $500K;
Other possible scenarios for EDC loan guarantee
Term financing for the acquisition of equipment needed to complete the productio
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Case Study - ABC Inc.
Buyer
financing
Challenges for the exporter:
Offering a financing proposal to a foreign buyer in addition to a product.
EDC support:
Financing for up to 85% of contract value, including up to 30% of local costs;
Average maximum period of term loan: 5 years; Registration of securities and foreign securities, if necessary.
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Case Study - ABC Inc.
Risk of
non-payment by
the foreign buyer
Challenges for the exporter: Protection against cancellation of the contract during production;
Ensuring buyer payment for the order after delivery.
EDC support:
EDC could insure 90% of the costs incurred before shipping;
EDC could insure 90% of the accounts receivable after delivery;
The bank can be designated as beneficiary;
Possibility of coverage for one market and one buyer or several markets including Canada andseveral buyers;
Different types of insurance coverage: shipping, contracts and services.
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Case Study - ABC Inc.
Performancebond
Challenges for the exporter:
Issuing a bond for the duration of the contract without tying up their line of credit
Protection against a wrongful call or a rightful call beyond their control.
EDC support:
Issuance of an EDC guarantee for 100% to support the letter of guarantee provided by the bank.
Insurance of 95% coverage for the exporter against a wrongful call by their buyer.
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Thank You!
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Thank You!
Contact us:
Call 1-866-283-2957, weekdaysbetween 8 a.m. and 6 p.m. EST
Visit our website at www.edc.ca
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http://www.edc.ca/http://www.edc.ca/