Article 12 states that only persons of NMI descent can acquire permanent and long-term interests in real property within the commonwealth.
Commerce Secretary Michael A. Ada in his Power Point presentation to the Saipan Chamber of Commerce members last week said most banks are not eager to provide loans to small businesses.
This, he said, was why he went to meet with Bank of Guam, First Hawaiian Bank and the Bank of Hawaii executives on Guam on July 27 after his department recently looked into the issue of Small Business Administration loans in the CNMI.
“I asked how many businesses applied for the SBA loan, how many were approved, how many of the applications originated in the CNMI,” Ada said.
The CNMI is limited to Federal Deposit Insurance Corp. banks only because SBA only guarantees FDIC banks.
“Even if the federal government backs 90 percent of a loan, we still have to take the 10 percent risk, and without the ability to secure land, it’s very difficult for banks to lend out to businesses for commercial loan,” Ada said.
“We have to look at how we can remove this barrier because we have this problem where banks are not as eager to lend out to small businesses,” he added.
He said Article 12 significantly impacts one’s ability to secure bank loans, but a tri-party agreement with CNMI government may address the issue.
“We will meet and develop an agreement with local branch managers to develop an agreement to address these concerns so that if a bank lends to a small business, they can have a way to ensure the property through the government as an agent to secure the property,” he said.
According to Ada, these agreements will be executed with regional management and will require a lot of issues but it is one step toward solving the problem.
He said another barrier for small businesses in acquiring commercial loans from the banks is the quality of the loan applications that they submit.
Ada said when small businesses ask banks for a loan, the banks will ask if they have already ventured into business or have previous experience, and if they have a business plan.
“A lot of small businesses don’t have quality business plans but this can be addressed by the Small Business Development Center to develop strong business plans to take to the bank for financing.
“We will be working closely with SBA to figure out how to fix this, because we would like to help our small businesses as much as we can,” Ada said.
Benchmarks
With the reestablishment of the local SBDC, Ada said they are targeting to extend client engagement to as many as 140 including one-on-one consultations, director meeting with small businesses, training, counseling, workshops, and more.
SBDC was reestablished after a 10-year absence.
Ada said the Department of Commerce partnered with the Commonwealth Development Authority, University of Guam and the SBA to re-open SBDC here.
Ada said Commerce and the Commonwealth Development Authority were required to put up cash and in-kind matches while UOG and SBA provided cash, equipment and technical assistance to bring back the program to the CNMI.
Prior to the reestablishment of SBDC, Ada said the CNMI was the only jurisdiction in all of Micronesia that did not have it.
“We would like to help the business community as much as we can. If you need assistance, come to our office and I will be willing to sit down and discuss business with you,” Ada said.
For more information, call the Department of Commerce at 664-3000 or fax 664-3067.
