The Canadian banking market has seen the development of some innovative trade finance solutions specifically targeted at the SME market. GTR speaks to Carole-Ann Miller (pictured left), president and CEO of Maple Trade Finance, about the company’s niche position in supporting Canada’s exporters.
One topic often raised during discussions about the Canadian banking market is the need for banks to become more cost-efficient. Unfortunately for small-to-medium sized enterprises (SMEs), this means that although larger banks would like, and indeed say they are able, to support their trade activities, in reality this support often doesn’t materialise.

However, other non-bank institutions have seen the opportunities in this ‘underserved” market and have developed their own financing products to support Canada’s SMEs.

Carole-Ann Miller is president and CEO of Maple Trade Finance, founding the company after she noticed a gap in the market during her time at one of the larger Canadian banks.

“I”d often get calls from branch managers asking for an increase to an operating facility for an existing client. These were clients that had a good buyer and a proven product but whose balance sheet did not support the request for additional credit: nine times out of 10, these requests would be rejected,” she explains.

She went on to set up Maple Trade Finance, a wholly-owned subsidiary of the Maple Financial Group, a Canadian global financial organisation. The group offers a range of financing tools, such as asset-based lending, invoice financing, and import financing and positions itself in the market somewhere between a factoring company and a traditional bank.

The key difference in the way Maple operates when compared to a bank is that it doesn’t base its decision to lend on the client’s balance sheet. In this way, it enables new businesses easier access to finance and gives them the opportunity to expand.

“We are almost like an incubator for established small to mid-sized firms with limited capital and whose business is growing faster than their borrowing capacity. Often banks will refer these clients to us, and we manage their trade business until they have grown sufficiently to secure their additional financing from traditional banks.”

Major markets

Although much of Maple’s business is supporting trade with the US it is also doing more business with emerging markets.

“Around 30% of our book deals with emerging markets, with particular focus on China and India,” Miller explains. “We are involved in both the import and export side. For instance, we may finance the import of goods from India into Canada, where the product is finished, or some form of ‘added value’s is given to the product, and then we finance the re-export of the product.”

Miller uses the example of one of the company’s Vancouver-based clients who makes clothing from their facilities based in China, and then sells them on to international brands and retailers.

This particular company had found it particularly difficult to secure traditional trade financing in Canada since their assets were in China. Also, their payment terms were 90 days, which was causing cashflow problems.

To provide the company with its required working capital, Maple set up a US$8mn credit facility-receivable financing. The transaction was based on the strength of the transaction and creditworthiness of the buyer, and gives the client necessary capital to secure larger orders, as well as allow them to establish a Canadian rating so eventually they might be able to tap for more conventional financing.

Typically, these facilities are no more than US$5mn, and are generally short-term transactions going out to 180 days at the most, but usually ranging between 30 and 60 days. The maximum transaction on Maple’s books is US$20mn a month provided to a construction company, and a US$18mn financing for a consumer household goods manufacturer. The pricing on Maple’s products is also said to be mainly comparable to that offered by a large-scale bank, and is usually cheaper than a factor.

Joining forces with banks

However, small financial institutions such as Maple are not trying to undercut banks in terms of pricing. More often than not they are keen to partner with banks.

Maple has a strong relationship with Export Development Canada (EDC). It has a reciprocal referral arrangement with the ECA, and it also has its own master EDC policy which allows Maple to secure credit insurance from EDC against non-payment of the foreign buyer on behalf of the client.

There are other firms offering SME financing similar to Maple, who have also developed close links with banks. Northstar Trade Finance is another well-known player, and features a number of banks as shareholders, including Bank of Montreal (BMO), Royal Bank of Canada, HSBC Bank Canada, and National Bank of Canada.

Julia Henriques, head of structured trade at BMO, explains: “We do not view Northstar as a competitor but as a partner offering an extension of our own capabilities. Northstar has recently entered the US market at the request of US Ex-Im, who saw what they were doing with EDC. We have just referred them a transaction which was too small for our book but for Northstar it was perfect. It involves a buyer in Mexico for a client of ours and fits Northstar’s capabilities really well.”