Financing Alternatives for SME Exporters

OACFDC Annual ConferenceJune 2005

Mary L. PalmerRelationship Manager

EDC’s Financial Services for

Small- and Medium-sized Businesses

OACFDC Annual ConferenceJune 2005

Mary L. PalmerRelationship Manager

EDC’s Financial Services for

Small- and Medium-sized Businesses

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Who is EDC ?

Financing Alternatives

Winning the Deal

Performance Security Guarantees (PSG)

Financing the Deal

Pre-Shipment Financing (PSF)

Getting Paid for the Deal

Buyer Financing Options

Discounting Accounts Receivable

Question & Answer

Today’s Agenda :

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Broad range of financial risk management services Extensive in-house market analysis/expertise Credit management expertise A Canadian Crown corporation founded in 1944 Commercial orientation with a public service mandate Supported $54.9 export sales from 6,962 cos. (90% were SMEs) Worldwide Offices: Mexico, Brazil, Malaysia, China, India, Poland Canadian Dollar Debt rates AAA/Foreign Currency Debt rated AA2 A self-sustaining organization

User-pay Consistently profitable

Export Development Canada

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Financing Alternatives :

Winning the Deal with Bonds

tContract

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Obtaining Advance or Progress payments may be difficult to negotiate depending on your industry / reputation potentially impacting your working capital. In exchange for a progress payment consider offering your buyer a Letter of Credit or Guarantee.

Your financial institution, with EDC’s Performance Security Guarantee, may post an L/C/G on your behalf without tying up your working capital.

Winning the Deal with Bonds

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You win:

Land the contract without providing more security or tying up working capital.

Your client wins:

They’re in possession of a L/C/G which protects their investment in you.

Your financial institution wins:

Their L/C/G is 100% guaranteed through EDC.

EDC wins:

Fulfilled our mandate to support exports.

A Win-Win Situation

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Financing Alternatives :

Inventory Financing

Build

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Common challenge facing many SMEs is financing the “build” or “pre-shipment” period.

Our Pre-Shipment Financing was designed to help finance up front COSTS in relation to inventory financing during the ‘pre-shipment’ or ‘build’ period that a financial institution may be adverse to fully financing.

EDC works with your financial institution by guaranteeing a portion of an operating (bulge) facility.

Inventory Financing

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Structure & Duration 75/25 risk share with financial institution. Your financial institution controls disbursement of funds. Can be specific contract or revolving.

Security No additional security required by EDC. We share on the existing security package.

Fees & Pricing Both determined by the financial institution.

Inventory Financing

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Financing Alternatives :

Getting Paid for the Deal

Deliver Get paid

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Financing for Your Buyer

EDC can finance your buyer….

For transactions less than USD $100,000 EDC can lend directly, on an unsecured basis, to your client for capital goods.

Funds are disbursed directly to you upon hitting milestones. Saves your client from having to arrange formal financing. Saves your client from incurring legal fees. Easy, online, application.

For transactions over USD $100,000 EDC can arrange financing with several variations / structures.

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Get Paid

Available from Export Credit Agencies such as EDC, and from private credit insurers

Risks typically covered: Buyer Insolvency or bankruptcy Payment default Repudiation Contract cancellation Political risks (war, revolution, transfer difficulties,

cancellation of export/import permits) EDC insurance pays you 90% of your loss when your buyer

doesn’t pay

Ensure you get paid, with Accounts Receivable Insurance

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Accounts Receivable lnsurance

Risks

Commercial Buyer Insolvency Default (non-payment) Contract cancellation by buyer refusal of goods

Political Conversion and transfer difficulties

War and related disturbances

Cancellation of import/export permit

Moratorium on country’s external debt

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Accounts Receivable Insurance What are the Benefits?

Increases Sales: into high-risk markets

more attractive payment terms to buyers

Protects against non payment and cost-incurred losses:

covers 90% of your losses

Allows you to leverage your foreign receivables: you banker may increase working capital

Competitiveness: meet your buyer’s credit needs

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Converting your A/R to cash….

With EDC’s Accounts Receivable Insurance you have opened the door to discounting.

EDC works with several financial institutions who will discount “EDC Insured” accounts receivable.

Primary benefits: Instant cash (~ 48 hours). Reduces collection time and efforts.

Discounting Your A/R

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EDC’s eProducts

allows an exporter to promptly determine their buyer’s credit profile before they close the deal (On-line insurability opinion and D&B Business Information Report).

an export can now insure a single transaction for up to 90% of their loss if a foreign buyer doesn’t pay.

EXPORTMarketInsight Exporters can now monitor political and economic

developments in key export markets around the world and receive alerts when changes occur in their countries of interest.

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EXPORTCheck What is EXPORTCheck?

Online credit card purchase of valuable buyer information (Insurability Opinion by EDC and/or a BIR from D&B) www.edc.ca

Benefits “Know your buyers” -- check them out before shipping to avoid

credit risk surprises Accessible and affordable -- Two key reports can be accessed

quickly, and prices start at Cdn$60 Broad market coverage -- A database of over 70 million buyers in

over 100 markets worldwide Quick access to EDC insurance -- We reserve cover for 10 days

when the buyer is insurable for easy access to traditional ARI.

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EXPORTProtect What is EXPORTProtect?

Online purchase of single transaction coverage of up to US$250,000 in 25 markets www.edc.ca

Benefits Protection against non-payment -- Insure single

transactions against non-payment Secure, easy and fast -- The application process is

easy and secure, and once you have applied, you know within seconds if EDC can put the cover in place

Broad market coverage -- Available in 25 key export markets

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1-888-332-6211

Mary L. Palmer416 640 7636

EDC’s Financial Services for Small- and Medium-Sized

Businesses

www.edc.ca