Export financing solutions for Canadian entrepreneurs
Understand trade finance tools to succeed in international business
Canadian exporters make more money, grow faster, stay in business longer and are more productive and innovative than non-exporters. To take advantage of international opportunities, your business can prepare by understanding and using trade tools designed to help finance export growth and mitigate risk.
See: Global expansion research tool for Canadian small businesses: Google’s Market Finder
“An export plan helps you understand how your business is structured and what available resources you have. It determines where you should spend money, identifies opportunities and foreign markets for growth, and outlines how you will compete internationally.”
Financing your export growth
Growing internationally generally entails important upfront investment. You may need cash for travel, or fees for distributors, agents, legal services, international manufacturing, licensing of products or intellectual property, or money to hire more people. There may also be costs associated with bidding on new projects. Doing your due diligence and having a plan prepares your business for growth. Securing working capital before you make your first international sale is an important consideration.
Credit insurance
Credit insurance allows you to insure your accounts receivable to mitigate the risk of non-payment. There are many reasons a payment may not come through, including customer bankruptcy, foreign currency fluctuations, political hostilities, or economic changes in the market where you’re selling. Your customer may simply not pay. Credit insurance can be customized to insure one or two customers, or your entire portfolio of domestic and foreign business.
Your lender may also place higher value on insured foreign accounts receivable when considering you for a loan, which could help you access more working capital when you need it.
Documentary letters of credit
A documentary letter of credit, commonly known as a letter of credit, is a form of payment between a buyer and seller, brokered by their respective banks. The buyer’s bank, (issuing bank), promises to pay the seller for goods or services, provided the seller presents all documents outlined in the letter of credit to their bank (advising bank).
See: How the TCS is supporting the growing number of women entrepreneurs in e‑commerce
Letters of guarantee
Also called a standby letter of credit, a letter of guarantee is an on-demand bank instrument. It can be issued directly by your bank on your behalf to a beneficiary, normally your buyer or supplier. Banks require collateral to secure the issuance of a letter of guarantee. But it can be useful in international interactions. A company can offer a letter of guarantee to your buyer to help you secure a deposit or guarantee your performance on a contract, for example.