Commerce now lead agency for federal financing

Given the financial conditions of the Commonwealth Development Authority, the Department of Commerce has now taken its place in being the lead agency to apply for the State Small Business Credit Initiative administered by the U.S. Department of the Treasury.

SSBCI, which was created when President Barack Obama signed into law the Small Business Jobs Act of 2010 on Sept. 27, 2010, is funded with $1.5 billion to strengthen state programs that support private financing to small businesses and manufacturers.

Under the SSBCI, states, territories, and eligible municipalities are given the opportunity to build upon or create successful models for state small business programs, including capital access programs, collateral support programs, loan participation programs, loan guarantee programs, and venture capital programs.

SSBCI is expected to help spur up to $15 billion in lending to small businesses and manufacturers that are creditworthy but are not getting the loans or investments they need to expand and create jobs by using federal funds to leverage private financing.

CDA loan manager Oscar Camacho said in an interview that the Treasury “feels strongly” that CDA is not as firm in its financial conditions as the local government.

“CDA’s financial projections indicate that we have our own shortcomings,” Camacho told Saipan Tribune. “They (Treasury) feel uncomfortable that we couldn’t be in a position to continue the program.”

Camacho noted, however, that the role of the Department of Commerce in the process is limited to only being the applicant for SSBCI.

“The Department of Commerce will contract with us, and CDA will do the marketing and the outreach services,” he said, adding that it will be CDA which will facilitate and coordinate the program in its entirety since they are the only agency that can engage the participation of banks and other private lenders.

Executive director Manuel Sablan, for his part, disclosed that the decision to involve Commerce was actually a suggestion from the Treasury in efforts to help the Commonwealth take “full advantage” of this one-time program of limited duration.

Sablan said they are now working on the application and are in constant communication with the Treasury to work on a timeline for the application.

According to Sablan, they are looking at availing only the collateral support and loan participation programs of SSBCI since these two are basically funded under the grant and neither the CDA nor the local government is required to disburse any money.

“There’s no contingent liability. It’s eliminated,” added Camacho.

Sablan said SSBCI can finance up to 50 percent of the loan of a small business owner to the bank, even allowing deferred payment of principal and interest up to 36 months with zero interest, providing the bank new cash and helping improve the bank’s cash flow.

“It’s a win-win situation both for the borrower, the state, and the bank,” he said.”

Camacho said over $13 million in SSBCI funds, are expected to be deployed which could also give local contractors the opportunity to compete against off-island companies for infrastructure or development projects that are otherwise not afforded by the local contractors.

Should the CNMI’s SSBCI application gets approved, Sablan said they intend to tap on the technical assistance that can be provided by the state of Michigan which has successfully implemented the program.