As the tourism industry is expected to start back up in the upcoming weeks with the re-opening of the Philip Goldson International Airport, tourism stakeholders have been battling with their finances. In an attempt to assist, the Government of Belize (GOB) held a virtual press conference on Wednesday, July 29th, announcing the launching of a special line of credit (loan program) that will be made available to tourism stakeholders through the Development Finance Corporation (DFC).
The presentations during the launch of the program were done by Prime Minister Right Honourable Dean Barrow, DFC’s General Manager Natalie Goff, and Financial Secretary Joseph Waight. The funds, a total of $10 million, are to help in the recovery of the tourism sector devastated by the current COVID-19 pandemic. Barrow explained that the funds available through DFC were secure via the Caribbean Development Bank. These funds were initially not to be used for working capital lending, but given the current situation, such restriction has been lifted.
Barrow explained that the interest rate on the loans would have been around 8%, but after negotiating with DFC it was brought down to 7%. In addition, GOB pledged to subsidize 1%, thus, the repayment interest for loans will be at the rate of 6%.
According to DFC’s Goff, mini-launches will follow throughout their different branches across the country on Monday, August 3rd, where further information can be obtained. Goff explained that the loan program is accessible to any locally registered entity with no less than 51% Belizean ownership. However, those establishments owned fully by non-Belizeans will be considered on a case-by-case basis. All applicants must have been operating before the beginning of the pandemic’s effects in the country. Applicants will also go through thorough screening, looking at documentation such as tax statements prior to COVID-19, demonstrate some financial performance, and prove to have no involvement in money laundering.
Loan Criteria
The loan program criteria indicate that the funding is to maintain economic activity and aid in recovery. At least 30% of the staff should be kept and the maximum amount to be borrowed is up to $1 million, which will be honored if considered necessary to keep the business operational. The loan is to be used for working capital, which covers salaries, utilities, supplies, fuel, property maintenance, insurance, financing, expenses associated with safety and health among others. Goff added that to get the loan approved certain collateral will be needed. “Real Estate collateral is preferred,” she said. “If that is not feasible, we will look at other criteria. For loans around $20,000, they can be secured by a third party and a promissory note.” Anything higher than that amount, in the vicinity of $100,000 can be secured via a combination of insurance assignment, hypothecation of fixed deposits, and a third-party of guarantee and promissory note to name a few. Any loans above $100,000 will need Real Estate for collateral.
Loan payback time
Goff said that businesses will get a one year grace period and given up to five years to repay the loan. Loans will be reviewed on an annual basis to assess the level of recovery. This will give DFC an idea if there needs to be an adjustment in the time period given to repay the loan.
Government capable of subsidizing
According to Financial Secretary Waight, the government is in a position to provide the 1% subsidy the prime minister pledged on. In a brief presentation, he said that their assistance to the loan applicants will be to the tune of $100,000, which will be for a short period of time. Waight said that the monies will come through perhaps additional equity contributions, and areas like the general revenue consolidated fund. “We will identify and make the money available,” Waight assured Belizeans.
The next step to continue stimulating the Belizean economy will take place on Friday, July 31st, when Prime Minister Barrow presents his administration’s economic recovery road map.
