Lawmakers approve government guaranteed business loans

The Legislature has approved a government motion for a $ 200 million loan program to help medium and large businesses meet their operating expenses and debt refinancing needs.

As part of this initiative, mid-sized businesses can borrow up to $ 750,000 and large businesses up to $ 3 million from five participating retail banks.

The government guarantees 50%, or up to $ 100 million, of the loans.

During debate on the motion on Wednesday, opposition members called for both an extension of the regime to small businesses, as well as restrictions on companies that have or will fire Caymanians.

The opposition demanded that the loans also be granted only to companies that were in compliance with the Ministry of Work and Pensions. Opposition MPs cited complaints from voters that they had been unfairly sacked and companies failed to pay their pension contributions.

Premier Alden McLaughlin noted that there is already a process under the labor law to tackle illegal activities in the labor market.

Cayman Finance Minister Roy McTaggart

Finance Minister Roy McTaggart added that there is a real risk that many companies will not be in compliance with retirement requirements, but may be able to access loans and use them to comply.

McTaggart has said he does not want to place additional restrictions and requirements on banks or borrowers when it comes to qualifying businesses. “We have to give them the opportunity to get back on their feet. “

He said the purpose of the loan program was “to help Caymanian businesses that really need it.”

Responding to requests to restrict lending only to Caymanian companies, he said: “It doesn’t matter to me and it doesn’t matter to this government whether the company is 60% or 100% owned by Caymanians.” because both were Caymanian companies. under the law.

He said small businesses were not part of the program because they are covered by the Small Business Grants program, which still had $ 4 million in funding. These subsidies do not need to be repaid by the companies.

McTaggart added that the government believes small businesses are “adequately covered” by this initiative. “If necessary, we can supplement this program to help them. “

The Cayman Islands Development Bank also provided loans to small and micro enterprises on preferential terms, he said. “We believe they are being helped in a direct and more beneficial way.”

Responding to a question from North Side MP Ezzard Millar why the government guarantee was needed, if the claimant were to be in good standing with the bank, the finance minister said the government wanted to ensure that these companies would continue to ‘be viable when the loans are taken out.

Neither the government nor the banks want to guarantee loans to entities already in default. “These are high risk loans,” he said. “In today’s environment, businesses will continue to fail.”

Loan and mortgage deferrals were drawing to a close and businesses would need support with their operating costs until the economy fully reopened and businesses could resume operations.

He said the government cannot force banks to waive their fees, but can control the government stamp duty that must be paid on a loan. Another way to help eligible businesses was exemption from government fees.

The government has no authority over the bank loan approval process. Banks can ask the borrower for a guarantee for the part of the loan that is not guaranteed by the government.

The finance minister said participating banks would have regular reporting obligations to the government on loan performance.

The government amended the motion at the request of the opposition with respect to the authority given to the Minister of Finance to allow other financial institutions to participate in the program. The amendment added that these financial institutions must be regulated by the Cayman Islands Monetary Authority.

The finance minister said he had been informed that there are entities in the Cayman Islands that provide loans to businesses and individuals that are not regulated by CIMA and therefore the government has accepted the addition.

Businesses that get a loan will only have to pay interest for the first 12 months and have up to seven years to repay both principal and interest. Applicable interest rates vary based on the Cayman Islands prime rate or US dollar plus up to 1.5%.

Banks participating in the program are Butterfield, Cayman National, CIBC FirstCaribbean, RBC Royal Bank and Scotiabank.

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