CDA eyes restructuring of loan terms

Despite the slow recovery of the local economy as manifested by the increasing number of visitors into the islands and stabilizing government revenues, public and private lending agencies are still likely to tighten their belts to clients seeking new or additional loans.

Board Chair John S. Tenorio said the Commonwealth Development Authority would continue to implement stricter measures in the approval of new loans citing as reason the overwhelming concerns on the capability of borrowers to pay back.

“We won’t be embarking on an aggressive approval of new loans although it’s pretty obvious that the economy is slowly recovering.
But we remain committed at helping businesses keep afloat by restructuring their loans and provide them technical assistance,” he said.

However, Mr. Tenorio told an interview that CDA is only open at restructuring the terms of payments of its clients’ outstanding loans and could not adjust existing rates because local regulations prohibit the lending agency from granting reduction in interest rates.

“CDA is less likely to infuse too much money into a particular client but we would be more than happy to help them in other ways like stretching their loans’ terms and giving them technical help to keep them afloat during the economy’s recovery period,” he added.

He said borrowers will continue to find it hard to borrow money from both government and commercial financing institutions since these agencies remain anxious on the clients’ ability to earmark funds for the repayment of their loans.

Mr. Tenorio explained that stabilization of the Northern Marianas economy does not immediately translate to the recovery of specific businesses, adding that it will take time for them to really witness high return of investments.

“The economy in general will survive but businesses will continue to witness low return of investments. However, the suffering with not be as difficult as during the last three years,” he added.

“It will still be tough to borrow money. We would want to see first if they have the drive in handling their finances and meeting their obligations,” he said. “CDA is going to put emphasis on the educational aspect like providing consultation meetings with distressed clients and teaching them how to do their financial statements.”

According to CDA Executive Director Marylou S. Ada, a series of consultations with owners and managers of small- and medium-scale businesses in the Northern Marianas disclosed that a big number of failed investments were caused by their failure to keep track of their finances.

“One of the biggest problems that we have unearthed during our consultation meetings with business owners and managers is that they don’t maintain a good book of financial statements,” Ms. Ada told an interview.

She added that experts mobilized by the development authority to do consultation sessions with managers of distressed businesses who seek CDA assistance have started pointing out the value of good bookkeeping.

Ms. Ada said CDA experts are also now on the lookout for other factors that may trigger the collapse of a business especially with the islands’ current economic conditions.

CDA recently launched a program aimed at educating its clients on ways to become better borrowers, underscoring the importance of a good credit history in their future loan applications.

Borrowers who have persistently pay their monthly dues on time in the past are less likely to obtain loans from either government or private financial institutions even if they are able to settle their existing obligation.