About lender
International trade is key to increasing sales and opening up new prospects, but taking on the world carries risks and many unknown factors for companies. Export Development Canada (EDC) was created to help Canadian companies take a step beyond their domestic market. It aims to help Canada play a more substantial role in international trade to create more jobs and promote domestic prosperity.
Its services include consulting, financing, equity investment, building connections with partners, and access to the international market.
The company was founded in 1944 and has assisted export transactions and foreign investment projects of Canadian companies worth over $1.5 trillion.
In respect of financing products, the company offers:
Buyer Financing;
International Financing Direct;
Structured and Project Finance
EDC Investment Matching Program
Inclusive Trade Investments Program.
The company also works with international trade guarantees, foreign exchange facilities, and surety bonds.
Pros and Cons
Pros
The company declares that it facilitates companies working in the international market, regardless of their size;
the company assumes the responsibility of collection from your customers (customer financing);
EDC carries out all credit checks on your customers;
You don't have to worry about the administrative part of extending credit to your customers;
Direct financing options are available for businesses with annual sales of $10 million or more;
This lender is more risk-averse compared to banks and works with multiple markets;
Flexibility in lending (to your company or directly to a foreign subsidiary);
Financing models are customized for each client;
Step-by-step guidance for international projects;
Support for women-owned businesses, including co-investor opportunities;
EDC Supports the Canadian market and its industrial sector and domestic service providers.
Disadvantages are everywhere, but they can be tolerable or so great that it is unpleasant to work with certain companies. However, for transparency, it is worth mentioning some aspects that could be considered a disadvantage of working with EDC Canada.
Cons
It is not clear whether a new company can count on collaboration to help it get started or whether it must wait until a specific revenue metric is reached;
There is no complete information about the documentation required from the company and its customers to obtain buyer financing;
It is not entirely clear how long the buyer's application and documentation will be considered for the loan disbursement.
Loans offered by EDC Canada have both advantages and disadvantages, but it is undoubtedly a financing alternative for exporters of goods and services. Benefits in this case mean:
flexibility in financing products;
the possibility to "outsource" financial issues with international customers of your own company;
no need to deal with collection issues when they arise with some payments for your products or services;
possibility to receive professional advice related to international business.
A disadvantage may be that little information is provided on the full eligibility criteria and funding approval, including how much time it takes and fees for services. One must submit an individual application to EDC to receive the detailed answers required.
Loan conditions
Financing external business contracts encourages foreign customers to buy Canadian products with convenient lending programs.
Buyer financing takes the following steps to arrange it:
First, the company must provide the export contract and customer information so that EDC can verify financing eligibility in this particular case. Any new agreement will be considered a new loan and new approval. However, the details must be clarified directly with EDC.
EDC will review the case;
In case of a favorable decision for financing, EDC informs the seller and the buyer;
EDC draws up a loan agreement;
EDC controls the buyer's payments, and the seller receives the money once the buyer approves the invoice.
To access international direct financing products for Canadian businesses, an EDC client becomes a borrower and must not only submit documents but also meet several requirements, including:
revenues must be between $10 million and $300 million;
a development plan and strategy must be submitted.
EDC will provide more information on the required steps upon request.
Structured and project finance product is approved for each project separately.
EDC shall review the project, and it shall provide information on the list of documents required for review and approval.
EDC investment matching program offers a decision within ten business days unless more time is needed for a complex project.
It proceeds in the following steps:
A client connects with a venture investor or private investor and advises that EDC is evaluating its suitability to participate in the project;
EDC conducts a full review of the potential financial partner once the investor has agreed with EDC;
EDC prepares a list of the required information and contacts you and your investor to obtain it;
If everything is in order and the criteria are met, an approval decision can be made within ten days. However, it may take 4-8 weeks to complete the transaction.
There are several other funding opportunities, some of which are indirect loans offered by the Company. For example, EDC provides a special Inclusive Trade Investments Program (ITIP) for Canadian companies led or founded by leaders identified as women, Black, or other dimensions of diversity to break through barriers and challenges to international trade. This is neither a grant nor a loan but commercial financing at market rates.
This product will be made available to Canadian businesses that meet the above criteria or whose owners can be identified as women, blacks, people with disabilities, etc.;
Business revenue of up to C$500,000 and significant growth potential for the applicant business.
Companies wishing to take advantage of this product will be reviewed by the EDC team, including an overview of revenue, transaction duration, and export profile.
Further details will be provided after the application is submitted to EDC, providing information on the following:
company's business requirements;
exact challenges faced by the company (need to raise more money, ensure customers pay for products or services, currency fluctuations, need to pay advances to suppliers, need to access money in the market, cash flow issues, R&D capital issues, need to manage debt, need to find customers and build international trade, need for consulting services and more knowledge about international business issues, etc.)
company's business needs;
the range of sales (from $0 to $300,000 and above);
the number of years in the market, which can be as low as 0 for companies not yet established and over five years for companies;
the list of countries where your company intends to sell in the next two years;
your personal contact information and information about the ownership of the company.
EDC also offers indirect lending facilitation to Canadian companies working with external markets to promote the Canadian economy and its products abroad. Such financing solutions help solve cash flow problems by EDC issuing a guarantee:
Export Guarantee, i.e., a repayment guarantee offered to financial institutions that open up more opportunities for obtaining credit;
A foreign exchange facility guarantee helps mitigate the risks of exchange rate fluctuations;
Account security guarantee helps to get pre-approval from lenders and solve financial problems;
Surety bonds help obtain better terms in dealing with the surety provider.
For guaranties, companies must contact EDC Canada for information on each project's eligibility and a list of required documents.
Methods of loan funding
The methods of loan financing depend on the choice of product from the range of products offered by EDC.
Suppose it is direct financing of business under export contracts so you can be sure you will be paid for your product. In that case, EDC arranges for payment to the company account when your international customers have approved the invoices.
EDC takes care of receiving payment from international customers and, if necessary, collection procedures so that EDC's Canadian customers can be assured that their earnings are safe and not at risk.
The money is transferred to the customer's account. The time it takes to transfer the money and consider the loan application depends on the project's complexity. On average, the review and decision on availability can be made within ten days, and the deal can be closed within 4-8 weeks.
EDC guarantees allow customers to obtain loans from other lenders on the terms of the lending product. This must be cleared with the lender to whom you wish to present an EDC- issued guarantee.