Even when interest-free loans are available, many local businesses would be unable to meet the stringent criteria for accessing them, as a few entrepreneurs found out when they attended a seminar hosted by the interest-free facility Caricom Trade and Support (CTS) Programme of Trinidad and Tobago (T&T).
On Wednesday at Red House, in Kingston a large number of small and medium-sized businesses participated in the CTS seminar, facilitated by the Guyana Manufacturers’ and Services Association (GMSA).
In 2005, the T&T government established the CTS to help Caricom states enhance their economic performance through diversification and improved trade capacity in individual economies. Initially the CTS programme only offered technical assistance financing but has now added machinery and equipment financing.
The main component of CTS is a revolving loan fund of TT$100 million (US$16 million) provided by T&T in four annual tranches. These loans are to be disbursed on an interest-free basis to Caricom firms, except for those in T&T, to procure technical assistance as well as to purchase machinery and equipment.
This joint technical assistance/capital procurement loan will be granted to a maximum of US$160,000; with the minimum for technical assistance loans ranging from US$6,000 to US$100,000. To qualify for this hybrid financial service facility, firms must utilize the funds for both technical assistance and capital expenditure.
In terms of the total amount of the loan that CTS will give, 75% is allocated to equipment and machinery and 25% to technical assistance.
Business Advisory Specialist at CTS Avenash Ramsoobhag said there was no quota system, the facility was operated on a first come, first served basis and the first payment on the loan begins six months after it is granted; the repayment period is 36 months after the first payment.
According to Ramsoobhag, the securitization instrument for the loan is a letter of credit for 25% of the sum for technical assistance and 100% of the cost of the equipment to be purchased.
The consulting services eligible under the CTS programme include negotiations, management information systems, financial management, facilitation of legal work and other short-term technical assistance. The eligible sectors include, but are not limited to, manufacturing, agriculture/fisheries, information technology, tourism, construction, wood processing and other service industries.
“We deal across sectors,” the business adviser informed the participants, adding that eligible applicants are profit-oriented industries including profit-based government entities.
The ineligible firms were stated as those seeking working financing and start-up capital (the company must be in existence for three years), companies with no trading experiences, engaged in activities harmful to the environment and supported by Cess Funds and/or Statutes. Businesses must also supply financial statements completed by a reputable accountant or institution for the last three years.
Programme Coordinator at CTS Neville Blake said the requirements were stringent because “it’s taxpayers funding,” and “funding is limited.”
During the question and answer session, many participants expressed strong reservations about their chance of qualifying. “Knowing the Guyana situation I would think that most people in this room would be disqualified,” Rice Miller and Aquaculture farmer Beni Sankar said.
Sankar explained that it would be difficult for small businesses to access letters of credit since the commercial banks were not so forthcoming with funding for certain projects.
In an interview with Stabroek News, Sankar said depending on his/her relationship with the bank the entrepreneur could acquire a letter of credit without putting up the entire sum. If there was no relationship, then the banks would require collateral. Sankar questioned whether small businesses would be able to obtain that letter of credit from local banks.
He described the 25% consultancy fee, which is mandatory, as, “very high”.
“In a way you can’t blame them [CTS],” Sankar said, adding, “they got to safeguard themselves.
“I am not hitting them as such but it’s the system.”
Another entrepreneur who supported Sankar said, “right now majority of the businesses are owned by the banks.” He was referring to the level of loans that businesses already have with commercial banks.
Yet another aspiring entrepreneur who applied for start-up capital from CTS said that his proposal was based on a five-year plan and he believed the 36-month repayment period was too short.
One entrepreneur told the CTS facilitators that his business has been in operation for close to two years, but although he wanted a loan from the facility, “I can’t get it.” This businessman would fall short of the required three years in existence criteria. This businessman said he would be able to repay the loan in less than 36 months, if it were accessible.
A number of other participants said they needed the funds but agreed that the concerns raised at the meeting should be taken into consideration and as one participant related this to the CTS representatives, “take the information today and do something more for us.”
The representatives contended that the criteria for the loans were established after consultation with regional and extra-regional banks and were supported by the T&T government.
Ramsoobhag called on the participants to take a closer look at the facility, adding that he believed it was a good facility.
Blake told Stabroek News that he could not say if the concerns raised at the meeting, when related to his principals, would result in any change in the criteria. But he did commit to bringing the concerns to their attention.
