Puerto Rico Economic Development Bank announces loan guarantee program
SAN JUAN – The president of the Puerto Rico Economic Development Bank (EDB), Luis Burdiel Agudo, announced Wednesday the implementation of a new program of commercial loan guarantees for small and midsize businesses (SMEs).
The announcement was made during the First SME Finance Summit, during which the president of the government entity presented the project to a large group of executives from the banking and cooperative sectors.
“Soon, probably between September and October, we are going to bring to market a commercial loan guarantee program under the Plan for Puerto Rico of Gov. Ricardo Rosselló Nevares, and we are offering details about these…guarantees for loans that will be given by cooperatives and will be guaranteed by the EDB and in the second phase we will include commercial banks,” Burdiel Agudo announced.
However, the official emphasized that the new program will not replace other financing the government agency offers to SMEs, but will complement to maximize the the EDB’s available capital.
Burdiel Agudo also indicated that the role of the EDB should evolve toward more effective business model that contemplates the economic challenges the island faces.
“We have to do things differently to adapt to the realities and economic challenges of Puerto Rico. With this program, our institution will strengthen its role as an agent of economic development and promoter of entrepreneurship in alliance with cooperatives and private banking, and I have to point out that the markets we go to will be determined in meetings we have with the Economic Development and Commerce Department so we are all on the same path,” he explained.
The EDB president said the first step is the creation of an insurance fund that will be nourished with a capital contribution from the institution itself. That fund will be deposited in a permanent trust that, he said, will give credibility to the program despite the island’s political ups and downs.
The revenue generated by the program, along with other contributions the EDB sporadically makes and the disbursements of that fund will be made according to a previously established regulation that stipulates the limits. The fund, in turn, will be used for claims payments and a prorated contribution for the program’s operational expenses.
“That is to avoid that in the future money can be taken out from that reserve fund to be use in other methods and the program loses credibility and its financial sustenance. The fiscal situation of the government is a challenge that presents great opportunities to adopt new initiatives that allow better use of the limited public funds available, without undermining our role of incentivizing economic activity,” he said.
“This program is going to have a maximum, [it] probably will not exceed half a million dollars. At the EDB, we have already experienced serious problems with large loans, and the truth is SMEs, which are responsible for three-quarters of the employment, are companies that do not need millions of dollars,” he added.
Burdiel Agudo stressed that the cooperative market in Puerto Rico is a very important group of 900,000 island residents, which is why it is important to strengthen it.