CDA rules out add’l loans for clients with delinquent credits

Instead of releasing additional funds for distressed businesses, the Commonwealth Development Authority has taken a new tact aimed at helping clients cut down on expenses to make it through the hard economic times.

Business experts from the development authority have been mobilized to call borrowers who have delinquent accounts for a series of consultation meetings, which CDA holds to identify problems that affect the ability of its clients to pay their dues on time.

CDA Executive Director Mary Lou S. Ada said allowing distressed businesses to secure additional loans at this point would only put more pressure on their ability to service their monthly financial obligation with the financial institution.

“Injection of new money will create more problems because it will mean additional financial obligation on the part of the clients amid slow business activity,” Ms. Ada said in an interview.

As an alternative, CDA provides delinquent clients with technical assistance that include business consultation sessions wherein ways to bring their respective fiscal house in order are discussed.

According to Ms. Ada, this process includes the payment flexibility given to CDA borrowers who are not able to regularly pay their outstanding loans on the approved amount.

She explained that although a bigger portion of CDA clients have continued to service their loans on time, most of them have asked the lending agency if they can pay at an amount lower than what was approved in the agreement.

At the same time, delinquent borrowers are also asked to consider other means that would help cut down their operational expenses both in manpower and overhead costs.

“If there is a need to cut down on the number of manpower, we advise them to do just that. And if they have to do the cashier work or the warehousing or delivery themselves in order to reduce expenses, we recommend that,” Ms. Ada stressed.

She disclosed that among the development authority’s diverse clients, businesses engaged in service-type or those that are tourism-related comprise the biggest portion of delinquent borrowers.

Ms. Ada also said that service-providers are followed by companies that have ventured into the commercial and residential structures in the list of CDA’s top remiss clients.

She explained that this has been the case because a big number of businesses that were put up by CDA clients were not properly planned, while some have rushed to expansion without putting into consideration the market’s volatility.

“We have witnessed a lot of clients who have expanded operations when they saw profit was good but later realized that the market was actually saturated,” she pointed out.

Ms. Ada also mentioned some clients who were granted loans for a specific business but actually ventured into other areas, aside from the originally approved undertaking.

“In this case, we ask them to concentrate on either the original purpose of the loan or on whichever venture is more profitable and where potential for growth is brighter,” she added.