A recently published report suggests that two of Canada's state development vehicles should start to issue letters of credit (L/Cs) to help Canadian firms through the credit crunch. The CEO of Allen-Vanguard Corporation, David Luxton, wrote the report.

Financing solutions

Luxton calls on Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) to identify and develop financing solutions and determine ways to restore credit markets.

One of his suggestions is for EDC and BDC to issue L/Cs directly to exporters so that their credit lines are unencumbered.

Export and domestic

The CEO of the Canadian corporation that exports to over 120 countries worldwide also reckons EDC and BDC should provide direct lending to small- and medium-sized enterprises (SMEs) that are significant exporters, irrespective of whether the loan is domestic or not.

He also recommends the development vehicles should provide operating lines of credit based on accounts receivable and inventories to improve exporters' access to working capital.

Development vehicles

The EDC provides trade finance and risk management services for Canadian exporters and investors.

The SME-focused BDC was established to help create and develop Canadian businesses through financing, venture capital and consulting services.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.