Performance Security Guarantee (PSG) Program - Overview	Contact EDC
In today's business world, more and more buyers are asking for bonds to be posted to guarantee a bid, performance or to secure advance and progress payments. These bonds usually come in two forms: bank instruments issued by a bank and surety bonds issued by surety companies. The difference: with bank instruments, buyers can demand payment at any time without explanation; with contract surety bonds the buyer has to prove the Exporter has defaulted either on the terms of the bid submission (bid bonds) or on his or her contract obligations. Buyers usually specify which type of bond (letter of guarantee/standby letter of credit or surety) they want issued under the contract. The challenge for the Exporter is to find out what it takes (the players, process, documentation, fees, etc.) to get a bond and then once they have it, to protect their interests. Bank Instruments (Letters of Guarantee or Standby Letters of Credit) How they work: Like a certified cheque; Act as a promise by the Bank to pay, regardless of the circumstances; Beneficiaries can demand that they be cashed without explanation or taking prior action, such as launching a lawsuit against the company; Used commonly throughout the world. How they’re issued: Directly: from the Canadian Bank to the foreign buyer; Indirectly: from a local Bank (in the buyer’s country) to the foreign buyer; with a counter guarantee from the Canadian Bank to the local Bank. This arrangement allows the Exporter to post a local letter of guarantee without investing his or her limited working capital in another country. How they’re secured: Usually by the Bank "freezing" the customer’s line of credit or working capital facility; Ensures reimbursement from the Exporter to the Bank in the event of a call by the buyer. The above can have a negative impact on the Exporter's overall business in that the necessary security restricts access to working capital. Goods and Services Eligibility Support is available for all types of goods and services sold under an export contract so long as the goods and services meet EDC's normal underwriting criteria, including environmental and Canadian benefits.