‘NMI close to being approved to execute small biz loan program’

Members of the Saipan’s Rotary Club pose with Department of Commerce’s Economic Development officer Kioshi Cody after his presentation at the club’s luncheon last Tuesday at the Hyatt Regency Saipan. (CHRYSTAL MARINO)

At this point, the CNMI is close to being approved to implement the State Small Business Credit Initiative, which is a loan program intended for microbusinesses in the CNMI, according to CNMI Department of Commerce’s Economic Development officer Kioshi Cody.

In his presentation to the Rotary Club of Saipan last Tuesday, he said he feels the CNMI is about 99% approved to implement the loan program, which will total $57 million in all, to be issued in three tranches by the U.S. Treasury.

The disclosed Tuesday that the $57 million State Small Business Credit Initiative for the CNMI is already about 99.9% approved.

Cody later explained that the CNMI’s share is part of the $10 billion that the U.S. Treasury has allocated to all the states, territories and tribal governments to get capital lending to underserved entrepreneurs.

“They also have a very specific emphasis on what they call very small businesses, which is businesses with under eight employees. So they want to make sure that all of us are driving it into the sole proprietors hands with a couple of employees; but they are really targeting what we all consider small businesses,” Cody added. “We are really excited because the CNMI is just one big underserved area, so everyone’s going to be allowed to apply for this.”

An individual does not have to be a U.S. citizen for them to be eligible for this program. “Unlike [the Small Business Administration], where you have to be a U.S. citizen [or] green card holder…anyone’s open as long as you go through the banks for their underwriting, and 90% of that money stays within our economy,” he said.

As well as being open to anyone, the program is especially aimed toward very small businesses, with as low as eight employees.

Cody said the State Small Business Credit Initiative will be a type of loan/credit. “It’s going to go through the participating banks, and what separates that from, say, traditional lending, is if you have a high-risk borrower, banks are just going to say ‘no.’ That’s it. There’s nothing they can do, [whereas with the] SSBCI, we can contribute up to 50% of the loan. So a bank will be able to say, ‘Hey we got a risky borrower, Commerce, if you can offset 50% of this loan, we will assume half the risk if you will take on half the risk.’ And this should push it more into businesses that normally would’ve gotten just a hard no.”

Cody explained that the $57 million will be given in intervals, with a three-year gap between each tranche. “So they’re going to give it to us in three different [tranches]: $18 million is the first bag of money we get. In three years we get another $18 million. But if we don’t get into it, we lose it. In six years we have to get into that first tranche or we lose it. So they definitely designed the program that we have to move this money as quickly as possible. We’re not just going to sit on it…”

Cody stated that the U.S. Treasury are currently looking over the CNMI’s fiscal 2020 audit report, and will be contacting them this Thursday about it. “So we’re just kind of bracing for them to review all 200-plus pages and come back to us.”

As to when he expects the CNMI to implement the program, Cody said it will either be in late February or early March. “I just don’t want to commit to late February because as far as I can tell, we only need one or two more pieces. Maybe it’s late February, hopefully it’s early March.” He assured, though that the U.S. Economic Development Administration and the Commerce Department have been focused and energetic “in moving this as quickly as possible.”

Cody said that, once the CNMI gets the green light, the U.S. Treasury will wire the first $18 million and they have 30 days to start deploying that. “There’s no sitting on this money and taking your time—no—it’s ‘you get it, you better start using it, and you got three years to get into the next one, or we take it away.’”

“If you’re a small business, now you have access to capital that [and] we can work with you. …You don’t know how to write a business plan? We can pay someone to…write that for you. You don’t know if you should be a sole proprietor or an LLC, what’s the risk and reward? We’ll help you talk to a lawyer.

“But for the most part, for what people want to do here? It’s going to be fair game…and we’re really excited that there’s no citizenship required, because now we’re going look at translating brochures into Tagalog, Korean, Chinese, Japanese, Chamorro and Carolinian, so we can really get this out and push it on all three islands.”

“…It’s going to be a really exciting time, especially with the state of the economy,” Cody added. “The key piece is, of course, they want us to be responsible stewards for the $57 million over the next 10 years, but the biggest piece right now is they’re taking a look at our 2020 single audit and if they have any concerns, we’ll find out on Thursday on our next phone call and then we’ll be able to see what we can do to resolve that.”