Late last week, the federal government announced its latest measures in response to the COVID-19 pandemic, including the announcement of the Business Credit Availability Program which will enable EDC (and Crown corporation, the Business Development Bank of Canada) to provide Canadian entrepreneurs with an additional $10 billion to help companies access to credit during this evolving crisis.
EDC is prepared to act swiftly to help Canadian businesses access the capital they need. By working together, EDC and businesses can minimize the impacts that this crisis is having on Canadians. Most businesses can start to access these program enhancements immediately.
Updates and Changes
Changes to EDC loan guarantees (Export Guarantee Program and the Trade Expansion Lending Program – for applicable financial institutions only)
In concert with financial institution partners, EDC’s Export Guarantee Program offers your financial institution a guarantee of repayment and makes it easier for you to access additional emergency liquidity. In the short term, EDC will:
- Add C$1 billion in additional working capital support through the Export Guarantee Program and Trade Expansion Lending Program
- Provide 6-month payment deferrals to new and existing clients as they relate to guarantee fees
- Streamline the underwriting procedures to provide quick cashflow relief
- Increase credit capacity in the market by being more flexible in our overall credit appetite
*New loan guarantee program (EDC Business Credit Availability Program Guarantee)
The EDC Business Credit Availability Program (BCAP) Guarantee offers financial institutions a guarantee on a client’s operating loan or a one-year term loan. It provides incremental emergency liquidity to Canadian companies facing challenges as a result of the COVID-19 crisis, enabling those impacted to pay their employees and cover short-term operating costs. Some key highlights of this new program include:
- A program built on the same principles as the Export Guarantee Program with expanded risk appetite, targeted at SMEs
- A 75% guarantee to your financial institution on the underlying credit facility
- Tenor up to 1 year on an operating line or cash flow term loan facility up to C$5 million
- A streamlined process that relies on the underwriting and due diligence processes of EDC’s approved financial institution partners to provide SMEs with rapid access to working capital
- Ability to defer guarantee fees (payable to EDC) for a period of 6 months
**More details on this new program will be shared within BMO in the coming days.
Changes to the EDC trade finance guarantees (Account Performance Security Guarantee and Foreign Exchange Facility Guarantee)
With EDC trade finance guarantee solutions, companies can eliminate the need for collateral, helping them free up much-needed working capital. In the short term, EDC will:
- Provide an increase of 25% support (bulge limit) for existing Account Performance Security Guarantees for capacities up to US$5 million
- Streamline the underwriting processes to ensure we can respond to business needs during these challenging times and leverage our expanded risk appetite
- Reduce the pricing of our Foreign Exchange Guarantee by 30%, and defer payments by 6 months
Changes to EDC’s insurance solutions
In the short term, EDC is making changes to its insurance solutions (Portfolio Credit Insurance and Select Credit Insurance) to help companies manage short-term cashflow challenges. Here’s how:
- When assessing new buyer coverage requests for viable buyers, EDC is prepared to take on greater risk than they have in the past.
- EDC is increasing flexibility in situations where a buyer’s credit deteriorates.
- Working towards a plan to provide flexibility with premium payments—to either defer them or adjust the fixed payment amount.
- For the next three months, EDC will waive the waiting period for claims under the export policies, allowing companies to file and receive payment for a claim earlier than under the standard policy terms and conditions.
IMPORTANT: All claims will still be closely evaluated using regular claims guidelines.
For Select Credit Insurance only:
- EDC is expanding the maximum coverage and will now insure buyer limits up to C$1 million (up from $500,000). Systems are currently being updated to support this change.
- For the next 90 days, EDC will cover losses for goods shipped even if the buyer has not accepted the goods, (subject to the other terms of the policy such as a dispute with the customer).
You can stay up to date on EDC efforts on their COVID-19 page, where they share related resources with the help of subject matter experts. With new information being added regularly, you can use this hub to find insights, tools and resources to help answer frequently asked questions about handling the effects of this pandemic.
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For more information about ITAC’s response to COVID-19 and current resources for businesses, click here.