Bank Case Studies: How EDC can help
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Here are examples of how EDC worked with banks to achieve their business goals.
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Bank Case Studies: How EDC can help
- 1. KEEP WORKING CAPITAL FOR DAY-TO-DAY OPERATIONS PROVIDE LETTERS OF GUARANTEE WITHOUT TYING UP CASH FLOW CASE STUDY:
- 2. Challenge: maple syrup company must post a letter of credit to the FPAQ equivalent to 20 % of the inventory required for the year
- 3. What they needed: to post letter of guarantee without tying up working capital
- 4. How EDC helped: Account Performance Security Guarantee covers 100% of the letter of guarantee to the FPAQ
- 5. Benefit to company: free up the collateral that would have been tied up as a guarantee
- 6. Benefit to financial institution partner: EDC offers a 100% guarantee
- 7. NON-PAYMENT RISK WITH A FOREIGN CUSTOMER SUPPORT FOR FIRST TIME EXPORTER CASE STUDY:
- 8. Challenge: small food distributor’s new French buyer wants payment terms of 60 days on 50,000 euro contract
- 9. What they needed: to offer good payment terms and to be protected from risk of non-payment
- 10. How EDC helped: Trade Protect insures 90% of the receivables for one customer
- 11. Benefit to company: access to a new market to get new orders while being protected from non-payment risk
- 12. Benefit to partner bank: as the insurance beneficiary, the risks are reduced
- 13. FINANCING WORK IN PROGRESS SUPPORT FOR FIRST EXPORT CONTRACT CASE STUDY:
- 14. Challenge: SME in IT just won $750,000 U.S. contract
- 15. What they needed: fund contract-related costs, including work-in-progress and inventory costs
- 16. How EDC helped: Export Guarantee Program shares risk with bank to guarantee 75% on $500,000 line of credit
- 17. Benefit to company: gets the working capital it needs to fulfill the contract
- 18. Benefit to financial institution partner: can offer complete solution to customer while sharing risk with EDC
- 19. INDIRECT EXPORT TO A SUPPLIER SUPPORT FOR POSTING LETTERS OF GUARANTEE WITHOUT FREEZING LINE OF CREDIT CASE STUDY:
- 20. Challenge: SME lands $300,000 contract with mining company that requires a $150,000 letter of guarantee to offer a 60-day payment term
- 21. What they needed: to post a letter of guarantee while maintaining line of credit for working capital
- 22. How EDC helped: Account Performance Security Guarantee provided bank with 100% guarantee on $150,000 letter of guarantee
- 23. Benefit to company: gets the working capital it needs to fulfill the contract and get better payment terms from supplier
- 24. Benefit to financial institution partner: can offer solution to customer while transferring 100% of the risks to EDC
- 25. CASE STUDY: INCREASING BORROWING CAPACITIES ON CURRENT CREDIT LINE SUPPORT FOR WORKING CAPITAL
- 26. Challenge: fast-growing infrastructure company needs more financing support international growth
- 27. What they needed: an additional $1.5 million to provide sufficient working capital
- 28. How EDC helped: Credit insurance increased bank’s risk protection while Export Guarantee Program allowed overseas inventory to be included as assets
- 29. Benefit to company: gets the $1.5 million it needs to fulfill contract and grow
- 30. Benefit to financial institution partner: can offer additional $1.5 million to customer’s line of credit while sharing risk
- 31. INCREASING CAPACITY SUPPORT FOR WORKING CAPITAL AND FOREIGN EXCHANGE FACILITIES CASE STUDY:
- 32. Challenge: company with an 18-month AED$3 million contract to Dubai worried about FX fluctuations
- 33. What they needed: working capital to fulfill contract and protection from exchange rate fluctuations
- 34. How EDC helped: Export Guarantee Program shared risk with bank to cover letter of guarantee and FX facility
- 35. Benefit to company: gets 400 000 $ of collateral from EDC to keep its working capital and fulfill the contract
- 36. Benefit to financial institution partner: satisfy customer’s need with a cost- effective solution and without requiring extra collateral
- 38. Challenge: green technology company needs working capital for fulfill 2 large contracts to the U.S.
- 39. What they needed: with 2 contracts increasing sales by 67%, more working capital was required
- 40. How EDC helped: provided a term loan of $1.2 million to fund 100% of costs for both contracts
- 41. Benefit to company: gets the working capital it needs to fulfill 2 contracts and continue to grow internationally
- 42. Benefit to financial institution partner: can defer risk of financing company that doesn’t currently meet financing criteria while offering a temporary solution and build customer loyalty
- 43. FINANCING EXPANSION ABROAD SUPPORT FOR FOREIGN SUBSIDIARIES CASE STUDY:
- 44. Challenge: Canadian equipment company’s cannot leverage borrowing capacity on the assets of its growing Mexican subsidiary
- 45. What they needed: working capital to support the operations of its subsidiary
- 46. How EDC helped: line of credit 100 % guaranteed by EDC to facilitate a letter of guarantee to the foreign financial institution
- 47. Benefit to company: was able to leverage foreign assets to get borrowing capacity
- 48. Benefit to financial institution partner: risk- sharing with EDC helped provide a comprehensive financing structure for customer
- 49. FINANCING EXPANSION ABROAD (CON’D) SUPPORT FOR OVERSEAS ACQUISITIONS CASE STUDY:
- 50. Challenge: Canadian equipment company needs support for acquisition in England
- 51. How EDC helped: provided a 60% guarantee on a $4 million term loan to acquire assets
- 52. Benefit to company: gets the $4 million financing it needs to expand its operations to England
- 53. Benefit to partner financial institution: risk-sharing with EDC helped provide financing solution for customer’s acquisition based on customer’s foreign assets
- 54. Challenge: Canadian equipment company needs support for acquisition in Brazil
- 55. How EDC helped: provided a term loan of $3 million over 5 years for acquiring assets in Brazil, as well as Political Risk Insurance
- 56. Benefit to company: gets the $5 million financing it needs to expand its operations to Brazil and protects assets and investments against certain political events
- 57. Benefit to partner financial institution: not limit financing capacity of the company’s additional needs and get a non-competing partner
- 58. Challenge: Canadian equipment company needs support for acquisition in the United States
- 59. How EDC helped: provided $2 million in equity to complete a private investor equity offer of $8 million
- 60. Benefit to company: gets the $5 million financing it needs to expand its operations to United States
- 61. Benefit to partner banks: EDC works with partner(s) rather than competing, enabling banks to offer a range of financing solutions to their customers
- 62. FINANCING PARTNERSHIPS SUPPORT FOR BANK SYNDICATION CASE STUDY:
- 63. Challenge: financing for acquisitions and working capital needs a syndicate of lenders
- 64. What they needed: leadership to help recruit North American banks to join the syndicate to raise $240 million
- 65. How EDC helped: provided $12.5 million towards the $240 million required
- 66. Benefit to company: gets the financing it needs to support its international expansion plan and working capital needs
- 67. Benefit to bank partner(s): EDC becomes a valuable partner in the syndication, able to fill shortfalls in required funding
- 68. CASE STUDY: FINANCING A SUPPLY CHAIN SUPPORT FOR INVENTORY LOCATED ABROAD
- 69. Challenge: Canadian broker for the garment industry must pay suppliers upfront before receiving sales revenues
- 70. What they needed: financing for inventory between the purchasing and sales cycles
- 71. How EDC helped: 100 % export guarantee to the financial institution to cover the inventory in transit and in storage abroad with the operation line of credit
- 72. Benefit to company: gets the financing it needs to pay its suppliers and better manage its cash flow
- 73. Benefit to partner bank: 100% guarantee enables bank to satisfy customer’s financing requirements
- 74. CASE STUDY: FINANCING A SUPPLY CHAIN SUPPORT FOR SUPPLIER PAYMENT TERMS
- 75. Challenge: Canadian pharmaceutical company must pay packaging supplier on delivery, creating cash flow problems
- 76. What they needed: a solution to get better payment terms from the packaging supplier
- 77. How EDC helped: provided a 100% guarantee on letter of guarantee to the financial institution
- 78. Benefit to company: packaging supplier is persuaded to accept 60-day terms, enabling company to better manage its cash flow
- 79. Benefit to partner bank: With the 100% guarantee, bank can provide letter of guarantee without freezing customer’s funds
- 80. CASE STUDY: REDUCE GLOBAL RISK AND ACCESS TO CASH FLOW SUPPORT FOR LETTERS OF GUARANTEE
- 81. Challenge: Posting letters of guarantee and FX risk leaves optics and photonics company struggling for sufficient working capital
- 82. What they needed: solutions to post letters of guarantee without tying up working capital and manage FX risk
- 83. How EDC helped: Account Performance Security Guarantee to provide a 100% guarantee to the bank for letters of guarantee and foreign exchange risk
- 84. Benefit to company: has access to funds usually tied up for letters of guarantee and FX facility for day-to-day operations
- 85. Benefit to partner bank: Can allow customer full access to their working capital, without having to freeze funds
- 86. CASE STUDY: UPGRADING EQUIPMENT SUPPORT TO UPGRADE EQUIPMENT
- 87. Challenge: smelting plant buying equipment for €5 million but a 50% advance payment is required
- 88. What they needed: protection from non-payment due to risks such as manufacturer’s bankruptcy; contract cancellation; and currency transfer and conversion
- 89. How EDC helped: Contract Frustration Insurance for advance payment in investment expenses
- 90. Benefit to company: gets the financing it needs to make the advance payment
- 91. Benefit to partner bank: as policy beneficiary, the bank is protected from risks of non-payment while able to offer its customer financing for the advance payment
- 92. Partnership between EDC and (Name of the bank) EXPORTING TO GROW YOUR CLIENTS’ BUSINESS – AND YOUR OWN
- 93. INCREASING THE CAPACITY WORKING CAPITAL AND FOREIGN EXCHANGE FACILITY SUPPORT
- 94. Challenge: A company with a 3M AED, 18-month contract in Dubai is worried about currency fluctuations
- 95. Need: To protect the profit margin of this new deal through a $2M foreign exchange contract
- 96. EDC’s solution: A foreign exchange contract guarantee on 100% of the collateral required for the foreign exchange facility
- 97. Benefits for the company: It received $400,000 in collateral from EDC, allowing it to save its working capital to complete the contract
- 98. Benefits for the partnering financial institution: It met its client’s needs with an affordable solution and without requiring other guarantees
- 99. INCREASING CAPACITY WORKING CAPITAL AND COMMODITY (FUEL) FACILITIES SUPPORT
- 100. Challenge: A company transporting goods across North America faces significant fuel costs, and is worried about variations in energy prices
- 101. Need: To protect the profit margin while locking in supply costs
- 102. EDC’s solution: A commodity hedging guarantee covering 100% of the collateral required by the bank for the commodity hedging facility
- 103. Benefit for the company: Getting a fixed price on fuel supply improved the company’s accuracy of budget predictions and ability to manage cash flow
- 104. Benefit for the bank: It met its client’s needs with an affordable solution and without requiring other guarantees
Editor's Notes
- A small maple syrup company in Quebec exports 50% of its products to the United States, England and Japan. The harvest season is short, and the company must ensure its supply of maple syrup is sufficient to cover sales throughout the year. The Federation of Quebec Maple Syrup Producers (FPAQ) requires a letter of guarantee corresponding to 20% of maximum inventory on consignment during the year Otherwise, the company must either pay for their syrup upon receipt, or buy it from the FPAQ as needed, knowing that more product may not be available.
- The bank requires collateral equivalent to the letter of guarantee. Providing the collateral means the company has insufficient working capital.
- Account Performance Security Guarantee covers 100% of the letter of guarantee to the FPAQ.
- This solution frees up the collateral. Otherwise, it would have been tied up as a guarantee.
- Can provide more credit to help customer grow, leading to more business to the bank. Insurance can be assigned directly to the financial institution so that you don’t need to worry about being paid, reducing risk to the bank. Win/win for all parties.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- Small Canadian food products distributor has won its first export sale. New customer in France wants payment terms of 60 days on the 50,000 euro contract. Non-payment would have significant impact on Canadian company.
- Company needs a way to take on the contract and offer good payment terms while protecting itself against risk of non-payment.
- EDC’s Trade Protect protects 90% of the value of the accounts receivable.
- Provides peace of mind that payment is assured and maintains sufficient cash flow over 60-day term, as bank has confidence to increase credit for up to 90% of the insured receivables. Credit insurance can be purchased in as little as 10 minutes online.
- Insurance can be assigned directly to the financial institution so that you don’t need to worry about being paid, reducing risk to the bank. Can provide more credit to help customers grow, leading to more business to the bank. Win-win for all parties.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- Young manufacturing company, specializing in electronic parts. Of $2 million in sales, 10% are exports. Just received a $750,000 major contract from the U.S. Terms are just 10% upon signing, balance on delivery. Company’s credit rating is “average.”
- To deliver on the contract, the company needed financing for contract-related costs, including work-in-progress and inventory costs. Credit rating and size of contract made it difficult for bank to provide more credit.
- EDC’s Export Guarantee Program shares the risk with the bank to guarantee 75% on a new line of credit for $500,000 (specific to the contract). The calculation of the borrowing limit is based on: 65% of the contract receivables (90% if the receivables are insured by EDC’s credit insurance) 100% of the work in progress and 100% of inventories related to the contract Financial institution has security through first-rank collateral on funded assets related to the contract (accounts receivable, work in progress, inventory).
- Company gets the working capital it needs to fulfill the new contract and is able to increase sales and growth potential.
- Financial institution shares the risk with EDC and still can offer a complete solution to its customer it could not otherwise undertake. Increased customer satisfaction and opportunity for repeat business from a growing company.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- Small business sells workwear and provides workwear cleaning services across several different sectors. They land a $300,000 contract to sell and rent workwear to a mining company. The company’s supplier requires a $150,000 letter of guarantee to offer a 60-day payment term. The financial institution issuing the letter of guarantee will need to freeze $150,000 in the company’s line of credit, tying up needed cash flow to fulfill the order or take on new contracts.
- To deliver on the contract, the company needed to post the letter of guarantee while maintaining its current line of credit.
- EDC’s Account Performance Security Guarantee provided a 100% guarantee to the financial institution for the full $150,000 letter of guarantee for 12 months.
- The company gets the working capital it needs to fulfill the new contract, without having to post collateral for the letter of guarantee. The company also gets better payment terms from the supplier. Company now has the cash flow to take on new contracts and grow business.
- No security required by EDC - Right of appeal only. The financial institution is guaranteed by EDC (AAA rating). Increased customer satisfaction and opportunity for repeat business from a growing company.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- A 10-year-old infrastructure company has revenues of $15 million, with 60% of its projects outside of Canada. The company is growing rapidly, and has an increasing backlog of projects valued at some $20 million. The projects are spread out over 12-24 months, with progressive payments.
- The company needed more working capital to support this growth and relieve the backlog. The company’s current $2 million line of credit, at 65% of capacity, was based on accounts receivable, inventory, and letters of guarantee to be issued for bids and performance guarantees. The company asked the bank to increase its $2 million line of credit to $3.5 million.
- Through EDC, the company decided to insure its domestic and international accounts receivables for up to 90%. Therefore, the financial institution’s risk protection increased from 75% to 90% for domestic accounts receivable; from 65% to 90% for U.S. accounts receivable; and from 0% to 90% for international accounts receivable. While financial institutions don’t usually count work-in-progress (WIP) when determining credit limits, risk insurance covering the production period increased its risk comfort level, enabling it to place a 50% value on WIP. When the company produced infrastructure equipment in Asia, EDC’s 100% Export Guarantee Program enabled the financial institution to include 50% of the value of this inventory.
- The company was able to get the $1.5 million additional working capital it needed to clear its backlog of projects and was able to continue its growth trajectory and take on new contracts.
- With the help of EDC’s solutions, the bank was able to satisfy its customer’s request for an additional $1.5 million in its line of credit, without having to authorize an increase in the credit line. It was also able to help its customer continue its growth, positioning the bank for more business with a strong company.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- Widgets Inc. recently put bank financing in place, including: Line of credit for $3 million, requiring the usual collateral Foreign exchange facility for $2 million, requiring 20% collateral Other facilities (term loan, credit card, etc.) for $250,000 Widgets Inc. just won a contract to export AED $3 million of widgets to Dubai with terms of 18 months. The Dubai company will provide upfront payment on the sale of 20%, or AED $600,000, against a letter of guarantee for the advance.
- They needed working capital to manufacture widgets to fulfill the contract and to protect profit margin against exchange rate fluctuations.
- EDC’s Export Guarantee Program provided a guarantee to the bank to cover the collateral for the letter of guarantee of AED $600,000 and the 20% of the FX facility of $400,000. This guaranteed a total amount of $1 million, enabling the financial institution to increase financing to Widgets Inc., accordingly.
- Widgets Inc. was able to manage the risks of exchange rate fluctuations, protecting its bottom line, and received the working capital financing it needed to fulfill the contract, without tying up its operating line.
- With the help of EDC’s solutions, the bank was able to satisfy its customer’s need without requiring extra collateral, leading to increased customer satisfaction. The bank also supported the Widgets’ growth, earning customer loyalty and positioning the bank for repeat business with a strong company.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- Small business specializing in equipment for the green technology sector. Sales of $3.3 million, all of which is exported outside of Canada. Just won two important contracts to the United States, totaling $2 million. Terms are 25% upfront and balance on delivery. Company has an “average” credit rating.
- With contracts increasing sales by 67%, this small company needed working capital to fulfill the contract.
- EDC provided a term loan of $ 1.2 million to the company which funded 100% of working capital costs for both contracts. Security for EDC included first-rank collateral on all assets (since there is no bank involved at present).
- Company had sufficient working capital to fulfill both contracts and the financing enables company to grow its business internationally.
- If a financial institution is unable to take on a financing risk, they can still make their customer happy. With this EDC solution, they is able to defer the risk of financing the company while still offering a solution for them to get the required financing, thus maintaining a strong relationship with the customer Increased customer satisfaction positions the bank for repeat business with a strong company
- Here is another example of how EDC worked with a bank to achieve their business goals.
- A Canadian equipment manufacturer owns a subsidiary in Mexico and sales of the subsidiary are growing. As the company’s offshore assets are not counted as collateral, the Canadian parent company is acting as “the bank” to finance the subsidiary’s operations.
- The equipment manufacturer needed working capital to support the operations of its subsidiary.
- Working with EDC, the subsidiary opened a line of credit 100% guaranteed by EDC. The company is able to post a letter of guarantee to the foreign financial institution. This allowed the company to get the working capital it needed without using assets located in Canada for collateral.
- Company was able to leverage its foreign assets to get borrowing capacity. Solution offered more financial flexibility to company, affording opportunities to grow its business
- Risk-sharing with EDC enabled financial institution to offer financing to its customer. The solution offered a complete financing structure guaranteed by EDC and its AAA credit rating.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- Now let’s look at the Canadian equipment manufacturer’s situation when they want to make an acquisition in England.
- EDC provided a 60% guarantee on a term loan of $4 million to acquire assets. Pari passu on collateral was taken by the financial institution on the acquired assets. EDC took a residual position behind the financial institution on the universal mortgage
- This solution allows the company to expand its operations abroad in England.
- Enables the financial institution to finance the acquisition with less risk, guaranteed by EDC (AAA credit rating). In turn leads to increased customer satisfaction.
- Now let’s look at the Canadian equipment manufacturer’s situation when they want to make an acquisition in Brazil.
- EDC provided a term loan of $3 million over 5 years for acquiring assets in Brazil. The loan is secured by a first-rank security on the assets in Brazil and a second-rank security on the Canadian assets. The Canadian parent company puts up a corporate bond. EDC’s Political Risk Insurance protects the assets in Brazil from risks such as government expropriation and political violence, thus further reducing risk level.
- The company can achieve its strategic expansion goals in Brazil and Political Risk Insurance provides peace of mind, knowing that the company’s Brazilian investments are protected against political events such as war, sabotage, coups, expropriation, or difficulties transferring money back to Canada.
- Financial institution is able to increase financing to its customer to help with their expansion needs and bank is able to build a relationship with a non-competing financial partner.
- Finally, let’s look at the Canadian equipment manufacturer’s situation when they want to make an acquisition in the U.S.
- EDC provides $2 million equity to complete the offer of a private investor equity of $8 million.
- Financing allows the company to achieve its strategic expansion goals Company has financing it needs to continue growing its business internationally
- EDC’s solution assists other financial providers to complete the offer, rather than competing with them. EDC can offer a range of investment vehicles to meet transaction requirements. EDC is a Crown corporation with in-depth knowledge and resources available to financial institutions. Can provide insight, information and relevant advice in the development of international strategies. Can introduce new potential customers and strategic partners, as well as resources such as government support programs (Global Affairs Canada). Can help facilitate strategic partnerships, supply diversification, technology transfer and joint ventures.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- An exporting company with operations in several countries needs financing for strategic acquisitions, as well as working capital to support its daily operations. A leading financial institution is willing to form a syndicate of lenders to support the company.
- The financial institution and the company are seeking North American banks to join the syndication and support the company’s international growth.
- EDC agreed to provide $12.5 million towards the $240 million required from the syndication, which has full first-rank security. EDC is subject to the same conditions as other lenders union.
- The company has access to the funding it needs to support its international expansion plan and its working capital needs.
- EDC can participate as a partner in the syndication, providing financing to fill any shortfalls in the required funding.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- A Canadian company provides brokerage services for raw materials for the garment industry. The company buys the raw materials in South America and ships them to a warehouse in Asia, a journey that takes approximately 4 to 6 weeks. Payment on the raw materials is due on delivery and the materials remain in storage for an average of two months.
- Payment on the raw materials is due on delivery and the materials remain in storage for an average of two months. The clothing industry is cyclical and seasonal, and buying and selling cycles are not aligned. Therefore, the company must be able to finance its inventory between the purchasing and sales cycles.
- Through its Export Guarantee Program, EDC provided a 100% guarantee for a loan covering the value of the inventory while in transit and in storage abroad Security for the foreign subsidiary is supported by a negative pledge clause on foreign inventories. Note: a security on inventory may be required for guarantees over $5 million.
- With the guarantee in place, the bank has the confidence to provide the company with the financing it needs to cover its sales cycle, from the time the inventory is purchased until it is delivered to customers.
- 100% guarantee enables bank to satisfy customer’s financing requirements, taking inventory located abroad into account.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- A Canadian pharmaceutical company uses a leading supplier to provide packaging for its products. The packaging company wants payment on delivery, before the pharmaceutical company has received revenues for selling its products. This causes cash flow problems for the pharmaceutical company.
- The pharmaceutical company needed better payment terms from its packaging supplier to better manage its cash flow.
- The company offered a letter of guarantee for payment to the packaging supplier in exchange for a 60-day term. EDC provided a 100% guarantee for the letter of guarantee to the financial institution.
- The more flexible payment terms helped the company free up and better manage its cash flow. A more predictable and accessible cash flow enabled the company to support its international growth.
- With the EDC guarantee, the financial institution didn’t need to freeze funds to provide the letter of guarantee, leading to greater customer satisfaction.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- A small company in the optics and photonics sector exports 70% of its sales to more than 20 countries in Europe, China, the Middle East, Turkey, India, and the U.S. The contracts generally include a deposit of 30% and a performance guarantee of 10%, with terms ranging from 12 to 24 months. The company faces regular currency fluctuation risks between CAD, US and EURO transactions. The company has an $8 million line of credit, typically at 65% capacity. The company’s customers require an advance payment letter of guarantee. As posting letters of guarantee generally require the freezing of funds or collateral, the company struggled to have the working capital needed to complete its contracts.
- The company needed a way to post letters of guarantee without tying up its working capital.
- EDC provided a 100% guarantee to the bank for $3 million to cover the letters of guarantee, and the foreign exchange risk for currencies CAD, US and EURO as described in the company’s contract of $800,000 USD: - 1 letter of guarantee advance payment for three months at $240,000 USD; - 1 performance letter of guarantee for 18 months at $80 000 USD; and, - $150,000 exchange rate guarantee for 12 months.
- Company now has access to funds that would usually be tied up as security for its letters of guarantee. This provides working capital and more manageable cash flow can be used to help grow the company.
- Allows customer full access to their working capital for ongoing operations, without having to freeze funds or request collateral. No security is required by EDC beyond right of appeal. The financial institution is guaranteed by EDC (AAA rating). EDC can also provide insurance to protect bank’s customers against wrongful calls, or calls that are justified but beyond the company’s control.
- Here is another example of how EDC worked with a bank to achieve their business goals.
- A smelting plant wants to upgrade its production unit. They have an opportunity to buy equipment for €5 million in Italy. However, a 50% advance payment must be made upon signing the contract.
- To proceed, the company needed protection from a number of risks, including non-payment risk such as bankruptcy of the manufacturer; contract cancellation; and currency transfer and conversion risks.
- EDC was able to offer Contract Frustration Insurance on the advance payment for the equipment investment costs. As another option, the company could use an EDC guarantee to secure any payment on account from the manufacturer.
- Because the company is protected from these risks, the bank is comfortable to provide the financing company needs to make the advance payment on the equipment.
- The insurance coverage can be assigned to the financial institution, thus protecting it from manufacturer’s bankruptcy risk, contract cancellation, and currency transfer and conversion risks.
- (Name of bank) has a long-standing partnership with EDC. We have contributed to your business development by offering you financial support and insurance, allowing you to grow your activities and those of your clients.
- Here is another example of a way EDC helped a bank reach its business goals.
- The company just won a new 18-month export contract worth 3M AED (Emirati Dirham) in Dubai. A $2M foreign exchange facility with guarantees of up to 20%
- The company had to protect its profit margin from fluctuations in the contract’s exchange rate. AND It needed working capital to start production and complete the contract.
- The FXG provided the financial institution with a guarantee that covers 100% of the collateral required for the foreign exchange contract, or $400,000 (20% of $2M)
- The company was able to manage the risks related to fluctuations in the foreign exchange rates, protect its earnings and receive the working capital it needed to complete the contract, without tying up its management account.
- Thanks to EDC’s solutions, the bank can meet the client’s needs without requiring other guarantees. The client is satisfied. The financial institution also supports the company’s growth, thus winning the client’s loyalty and positioning itself favourably for other business opportunities with a strong company.
- Here’s another example of how EDC helped a bank reach its business objectives.
- The challenge could also have been… A company that provides transport services across North America worries about variations in energy prices *** The export can be direct and indirect
- It improves the accuracy of budget predictions by getting a fixed price on fuel supply, which allows the company to better predict outflows and improve cash management, and possibly gives it an advantage over competitors in a call for tenders.
- It meets the client’s needs with an inexpensive solution without requiring other guarantees, while giving the client access to more liquid assets to pursue new business opportunities.