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Accounts receivable can be one of the largest assets on your customer's balance sheet, yet they're often overlooked when it comes to insurance. As you know, many companies use their insured receivables as security to acquire working capital or operating line financing from banks. When you are utilizing insured accounts receivable as collateral for a lending facility, a Direction to Pay document attached to an ARI policy directs EDC to copy the Bank on all correspondence related to the policy and to pay all claims under the policy directly to the Bank. Alternatively, if the Bank purchases the Exporter’s receivables on a limited recourse basis, EDC coverage may be transferred directly to the Bank through a Tripartite Agreement.
EDC has a new arrangement with Compagnie Française d'Assurance pour le Commerce Extérieur- Canada Branch (Coface) under which the Exporter can obtain cover for its export receivables form EDC and for its domestic Canadian receivable from Coface under one policy administered by EDC.
Benefits to the Bank:
- Up to 90% of the loss amount will be paid directly to the Bank on ARI policies with either a Direction to Pay or Tripartite Agreement in place;
- The Exporter's foreign accounts receivable collateral held by the Bank is enhanced with EDC's AAA rated credit and it's domestic accounts receivable collateral is enhanced by Coface's Aa3 Moody's rating.
- The Exporter's financial viability is enhanced. EDC pays claims on losses related to insured accounts receivable ensuring more reliable cash flows.
Benefits to the Exporter:
- Peace of mind knowing they are covered up to 90% of the loss amount if the buyer does not pay;
- Increased sales. We enable the Exporter to offer more flexible payment terms to their clients;
- Enter new markets/expand existing markets. EDC offers international credit and political risk management expertise, and advice specific to the Exporter's industry; and
- Increased cash flow through enhanced working capital lines from financial institutions.
Goods/Services and Coverage Eligibility Support is available for capital, non-capital and knowledge-based business goods and services sold under export contracts so long as the goods and services meet EDC's environmental and Canadian benefits criteria. As a federal Crown corporation, we require the deals we support to provide an economic benefit to Canada. Support under EDC's short term ARI program is generally in respect of transactions with payment terms of 180 days or less.
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