Introduction to Bonding
International customers often require contract bonds as financial assurance that a Canadian company will honour its contractual obligations.Bonds can either be issued by banks in the form of standby irrevocable letters of credit (ILC) or letters of guarantee, or by surety companies in the form of contract surety bonds. Letters of guarantee are commonly used around the world, surety bonds more so in North America and increasingly in Latin America.
Obtaining a bond can be difficult, especially if your company lacks access to the required security or does not meet other underwriting criteria. Although EDC does not issue bonds directly, our bonding services simplify the process.
Canadian exporters purchasing and selling forward contracts can also be required to provide collateral to their financial institutions, tying up working capital. EDC can help exporters forego this requirement.
Contract Bonding Services
- 100 per cent bank guarantee: With the Performance Security Guarantee (PSG), EDC offers a 100 per cent guarantee to the bank for a bond posted on your behalf. This frees up the working capital banks need as collateral.
- 100 per cent reinsurance capacity: With Surety Bond (re)Insurance (SBI), EDC provides your surety company with risk-sharing reinsurance capacity of up to 100 per cent of the bond liability amount.
Foreign Credit Facility & Supplier Services
- 100 per cent bank guarantee: A Financial Security Guarantee (FSG) replaces the collateral needed to secure working capital lines of credit with foreign banks or letters of guarantee for suppliers.
FX Margin Requirement Services
- 100 per cent margin replacement for forward contracts: With a Foreign Exchange Facility Guarantee (FXG), Canadian companies can free up working capital held against forward contracts entered into with their financial institutions.
More information
Coverage for Contract Bonds (PDF Format)
Bonding FAQs
Glossary
