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MARG is a guarantee protecting the Bank against a loss due to a customer's failure to pay their operating line secured by the customer's foreign accounts receivable. Under this program, EDC will guarantee 90% of the lesser of:
- The outstanding amount borrowed under the line of credit; or
- The eligible foreign accounts receivable.
The Bank is responsible for ensuring there are sufficient eligible foreign accounts receivable. EDC asks that the bank maintains a list of eligible foreign accounts receivable available to cover the amount borrowed by the Exporter, following the Bank’s normal practice for monitoring receivables.
What's the criteria?
- All of the customer's foreign accounts receivable with credit terms of up to 180 days and not more than 150 days overdue are eligible. (Note: USA receivables are considered foreign receivables under MARG).
- Export sales to the foreign affiliates of the Exporter are not eligible.
- Exports to countries excluded from the program are governed by the current Government of Canada policy regarding sanctions. Exports to Angola, Myanmar and Iraq are not eligible to secure a MARG operating line. EDC will inform the Bank of any changes to this list when they occur.
- EDC will not approve a MARG operating line request for sole purpose entities created to export to only one country (e.g. Cuba) to gain access to MARG.
- All MARG documents (e.g. Application for MARG Coverage, Declaration and Consent form and Application for MARG Payment form) are available under “Forms”.
Who is eligible?
- At the time of application small Exporters with total sales; or, new companies with forecasted sales of up to and including CDN $10 million are eligible and with specific approval by EDC an Exporter with annual sales up to $25 million may be approved. Each Exporter may have a MARG guaranteed operating line, or lines of credit, which in aggregate total up to CDN $500,000 or US $350,000.
- In determining the size of a MARG operating line of credit the total amount cannot exceed 80% of the normal value of the Exporter's foreign accounts receivable. Seasonal sales may be taken into account when determining the size of the MARG line, but during off-season periods, when accounts receivables are low, the Bank should ensure that the utilized amount of the line does not exceed the existing eligible foreign accounts receivable.
Benefits for the Bank:
- The Bank can increase its financing to and associated fees from smaller Exporters with foreign receivables without additional administrative burden to the Bank or their customers;
- The Bank is not required by EDC to undertake any extra administrative or reporting requirements for a MARG line. Once the line is approved and paid for, EDC does not require any further contact until the line is renewed annually;
- The Bank does not have to ensure that the Exporter is properly administering his/her credits insurance policy, only that the Exporter's foreign receivables cover the amount borrowed;
- In the event of a claim, EDC will take the responsibility for collecting the eligible foreign accounts receivable, thereby eliminating this problem for the Bank.
Benefits for the Exporter:
- MARG can increase the availability of operating line financing to smaller Exporters who do not want credits insurance;
- There are no additional requirements for the MARG customer.
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