Overview
Small and medium-sized exporters often encounter problems raising sufficient working capital to fund up-front costs associated with export contracts. To address this problem, EDC, in cooperation with Scotiabank, has developed a risk sharing guarantee designed to encourage the lender to advance pre-shipment loans, operating facilities, term loans in support of infrastructure investment related to a specific contract, general corporate purpose financing or the acquisition of a foreign asset or company by providing additional security.
Program Highlights
- EDC's guarantee covers up to 75% of the loan made by the Bank to the Exporter to fund pre-shipment costs necessary to complete the export contract.
- The terms of the loan follows the delivery terms under the commercial contract.
- The approved loan can have one or multiple draws for amounts up to 100% of the contract costs.
- Pre-shipment loans can also be used to finance indirect exports such as component sub-supply in Canada related to a product that is ultimately exported. When required, revolving facilities can be looked at on a case-by-case basis.
- EDC and the Bank share pro-rata in the security taken by the Bank.
- There are no add-on fees payable to EDC.
- Since EDC shares proportionately in the risk, EDC also shares similarly in the Bank’s interest spread.
- Set-up fees charged by the Bank are shared equally.
- The approval process is fast and simple.
Benefits
- Advantageous for small Exporters.
- Does not affect existing operating lines of credit.
- Includes an EDC guarantee of up to 75% of a Scotiabank loan.
Variations
Contract Specific (pre-shipment) – the bank provides a facility to fund costs on a specific export contract.
- Bank makes a demand facility separate from the operating line.
- EDC guarantees up to 75% of the facility.
- Guarantee usually terminates a month after anticipated payment by the buyer.
- EDC shares in the security that would normally consist of the Inventory, Work In Process, Accounts Receivable and any other security that is introduced or in place associated with the separate facility.
Revolving Facility (pre-shipment) – has the same features as the Contract Specific facility but can support multiple contracts on an ongoing basis.
- The facility is capped and EDC approves each PO under the line
- Guarantee usually terminates a month after the lender's annual review date.
Operating Facility – differs from the other cases in that there is no separate line of credit and EDC is guaranteeing the general operations of the business.
- EDC guarantees up to 50% of the operating line.
- Guarantee usually terminates a month after the bank’s annual review date.
- EDC shares in all of the security held by the bank.
- EDC’s guarantee must provide incremental benefit to the exporter (i.e. the operating line must be increased as a result of EDC support).
- EDC’s dollar value of support must be less than the dollar value of their exports.
- The exporter must have had either at least $5.0 million in export revenues in each of the last two years or at least 15% of total revenues over the last two years, from exports.
Term Loans - supports the infrastructure investment in Canada relating to specific export contracts; infrastructure investment in Canada relating to general corporate purpose financing; and foreign direct investment out to support the acquisition of a foreign asset or company.
- Bank provides a separate term loan (normally not more than 5 years.)
- EDC guarantees up to 50% of the term loan.
- EDC shares in all of the security for the term loan which would normally be a collateral mortgage on the financed equipment.
- EDC’s dollar value of support must be less than the dollar value of their exports.
- For infrastructure investment in Canada relating to general corporate purpose financing or the acquisition of a foreign asset, the exporter must have had either at least $5.0 million in export revenues in each of the last two years or at least 15% of total revenues over the last two years, from exports.
Exporter Eligibility
Small and medium-sized Canadian companies with annual revenues up to CAD 25.0 million in most sectors are eligible for support under the program.
Goods and Services Eligibility
Support is available for goods and services sold under an export contract so long as the goods and services meet EDC’s environmental and Canadian Benefits criteria.
