EDC’s Foreign Exchange Facility Guarantee helps companies manage cash flow

EDC’s Foreign Exchange Facility Guarantee (FXG) helps Canadian exporter grow sales and manage its cash flow

ECBVerdyol is a Manitoba-based manufacturer of high-quality revegetation, erosion and sediment-control products. It exports across the United States and some Latin American countries.

The challenge: Protecting against foreign currency fluctuation

More than half of ECBVerdyol’s sales are outside Canada, primarily in the U.S., Mexico and Chile. When ECB provides longer payment terms—something it needs to offer to remain competitive—currency rates can significantly change. Meanwhile, the company still has to cover its costs, including materials and payroll, in Canadian dollars.

How EDC helped

The company approached its financial institution to set up a foreign exchange (FX) contract, to build in FX predictability. James also reached out to EDC, and we put a Foreign Exchange Facility Guarantee (FXG) in place with ECBVerdyol’s financial institution. Our FXG provides a collateral replacement, instead of tying up the company’s assets as collateral against the FX contract.

Results

Knowing that the FX contract would give ECBVerdyol more predictable revenues gave the company the confidence to take more calculated risks. And using EDC’s FXG, in place of collateral, allowed ECBVerdyol to put its cash back to work growing the business.