Treasury OKs second tranche of funds for NMI’s small business loan program

The U.S. Department of Treasury will allow the CNMI to use the second tranche of funds for its State Small Business Credit Initiative before the deadline to use up the first tranche.

The SSBCI program, introduced to the CNMI in 2012, allocated $13.2 million to the CNMI to be used for small business loans.

The allocation is divided into three tranches and the first tranche is set to expire this June.

“We have to expend 80 percent of the first $4 million by June in order to qualify for the second tranche,” press secretary Ivan Blanco said.

The CNMI, however, is currently only able to expend “a little over 20 percent” of the first $4 million.

Blanco said he and other government representatives went to Washington, D.C., to attend a forum on the SSBCI and urge the U.S. Treasury to allow the CNMI government to use the second tranche.

“We are very fortunate that the U.S. Treasury agreed to extend or to qualify us to go for the second tranche even if we did not yet meet the 80 percent,” Blanco said.

The second tranche of funds for the SBBCI is also $4 million.

He said U.S. Treasury “saw that we are making loans” and that the CNMI expects more small businesses to apply for loans from participating banks.

Blanco added that the U.S. Treasury understands the CNMI’s situation. He also expressed some surprise at the low rate of businesses availing of the loan program. “I thought we needed money, right?” he said.

He said the participating banks—City Trust and Bank of Guam—are in the best position to give details on the number of applicants or entrepreneurs and the reason behind the low turnout.

“[The banks] are doing their due diligence to weed out which are the bad loans and the good [ones],” Blanco said.

Blanco said after 2017, or the completion of the SBBCI program, the CNMI can still use the money if there still some left, and if the U.S. Treasury allows the Commonwealth to do so.

He said the Inos administration is encouraging small businesses in the CNMI to avail of the SBBCI loans.

No deadline has been given yet on the second tranche of funds.

In March 2012, the Department of Commerce was allocated $13.2 million from the U.S. Treasury to fill lending gaps—mainly for otherwise creditworthy businesses that have shortfalls in collateral or cash flow in the initial stages of start-up or expansion.

The SSBCI program has several unique features, including the ability to guarantee loans to non-U.S. citizens and design deferred loan payments that enable the borrower to service bank loans while building cash flow for future full payments.

Retail businesses and small contractors are also excellent candidates for the program.

Early this month, the Commonwealth Development Authority added City Trust Bank as a depository of SSBCI funds.

CDA acts as a conduit of these SSBCI funds deployed by the U.S. Treasury. The program is bank-driven. Banks can turn to SSBCI for cash collateral or loan purchase support to assure their investment in the local businesses they loan to.