An “ultra-conservative” banking sector is posing some challenges to the CNMI State Small Business Credit program, with only two banks involved so far in a program designed to help local entrepreneurs get their businesses started with cash collateral and loan purchase support, according to Commonwealth Developmental Authority’s Oscar Camacho yesterday.
The SSBC program has until June to deploy 80 percent of its initial disbursement by the U.S. Treasury. Otherwise, the entire $13.2 million for the CNMI “might not be available,” according Camacho, who spoke at the Saipan Chamber of Commerce general membership meeting yesterday.
Right now, nine loans have been approved to the tune of about $1.7 million. Camacho said there are more loans in the pipeline that they hope are closed by next month.
He said the CDA has found banks “ultra-conservative” in trying to get them involved. They appear to not want to “tweak the model” that is working for them, or share information on their underwriting policy, he said.
“We need borrowers to pull the banks,” he told the Chamber crowd. “This is your program… to make loans accessible [and] capital, easier.”
He said CDA only “facilities and coordinates.” The program is otherwise “bank-driven.”
He said that if a potential business finds application response to “take forever,” they could contact CDA with request to make their application more palatable.
He applauded the Bank of Guam and City Trust Bank, the sole two banks participating.
In an interview, Camacho said “nothing is wrong with being prudent.” But he pointed out that banks are only taking in a small amount of borrowers, when business opportunities are “wide.”
The SSBC program offers two lending programs. The Loan Purchase Participation program allows CDA, among other things, to purchase 40 percent from a lender on new diversification projects with short-term cash-flow deficiency. The Collateral Support Program can provide up to 50 percent cash collateral for a borrower that exhibit cash shortfall for a traditional commercial loan. Maximum participation and collateral support is both capped at $5 million.