Commonwealth Development Authority loan manager Oscar Camacho said, “A total of $13,168,350 is what we are looking at to deploy in SSBCI [State Small Business Credit Initiative] money.”
Camacho said the CNMI needs to push a total of $130 million in total private financing: $80 million in collateral support program and over $50 million in loan purchase program.
States like Idaho, Iowa, Mississippi, Hawaii, and Louisiana, which far bigger than CNMI in terms of population and land area are eligible for only $13.2 million in SSBCI money.
Under the $1.5 billion federal program, the states and insular areas are eligible to apply for federal funds for state-run programs that partner with private lenders and investors to increase the amount of credit available to small businesses.
The states and the insular areas must demonstrate that every $1 in federal funding will generate a minimum of $10 in new private lending.
“Are the banks willing to loan in this economy? It is because of this economy that we are getting into this,” Camacho said.
To demonstrate the capacity of the CNMI for loans, Camacho cited a bank report covering the period of the 1990’s through 2000 and he said there were $600 million in commercial loans.
“Not even $100 million in commercial loans now,” he said.
He said it would be an opportune time to stimulate the economy if the SSBCI money would be able to induce the banks to release loans to small businesses backed up by the SSBCI program.
The Department of Commerce, which now becomes the applicant to the Treasury grant on behalf of the CNMI, is applying for two programs: loan purchase program and the collateral support program.
Commerce would delegate administering of the program to CDA.
The collateral support program pledges cash collateral to lending institutions in support of individual loans.
Camacho said they are looking at term loans.
“We do feel strongly that it works best with lines of credit,” he said.
Camacho said they are focusing on only 50 borrowers for both programs: 20 for loan purchase program and 30 for collateral support program.
“We are looking at maybe four $10 million projects,” said Camacho adding that there’s $79 million in collateral support program that they anticipate for the CNMI.
“We need to support this. We need to present to Treasury that this is possible. We need to back it up,” he added.
“With a credit facility in place, backed up by SSBCI money, we can induce the bank [to disburse loans to businesses],” he said.
