Exporting Your Goods
Options for Additional Working Capital
One of the reasons why small businesses have difficulty accessing cost-efficient additional working capital is that financial institutions perceive them to be too great a risk, especially in the arena of export. The Government of Canada, through Export Development Canada, has developed several facilities that can offset the financial institution’s risk so that they are more willing to lend to you and you do not have to tie up your assets as collateral. The following five questions and answers can help you decide if any of these options are appropriate for your business?
What options exist for offsetting perceived risk on the part of financial institutions?
What is a Foreign Exchange Facility Guarantee?
What is a Performance Security Guarantee?
What is a Surety Bond Guarantee?
What is a Financial Security Guarantee?
What options exist for offsetting perceived risk on the part of financial institutions?
- Foreign Exchange Facility Guarantee
- Performance Security Guarantee (PSG)
- Surety Bond Guarantee
- Financial Security Guarantee
What is a Foreign Exchange Facility Guarantee?
A Foreign Exchange Facility Guarantee gives your financial institution a guarantee in lieu of collateral when you purchase foreign exchange contracts to protect against currency fluctuations.
What is a Performance Security Guarantee?
A Performance Security Guarantee provides a 100 per cent guarantee to your bank when they post a contractual guarantee on your behalf so that they do not need to require collateral from you. If you regularly ask your bank to post contractual guarantees, an Account PSG can be set up.
What is a Surety Bond Guarantee?
A Surety Bond Guarantee protects your surety company in the event of a call on a contractual guarantee they have issued on your behalf by providing the surety company with 100 per cent reinsurance capacity, again in lieu of collateral from you.
What is a Financial Security Guarantee?
A Financial Security Guarantee replaces the collateral usually required to secure operating lines of credit with foreign banks or letters of guarantee for suppliers, regulatory bodies, utilities, etc. The guarantee is unconditional and equal in value to the letter of guarantee for up to one year.