Photo by Kyle Macpherson/Freelance Photographer
Participants at a workshop hosted by the Corporate Finance Broker Unit of the Private Sector Development Programme, at the offices of Jamaica Trade and Invest, June 30.Richard Deane, Business Writer
Blossom Cover is a pig farmer from Melrose in Manchester, whose product supplies, among other markets, the jerk stalls that are lined up as shacks along the roadside in the community, in easy reach of commuters.
Cover has reared pigs for years, but after Hurricane Dean in August 2007, she has been struggling to keep her business afloat.
Eight months later, she is hunting for capital to invest in the reconstruction of her pens, torn to pieces by the storm.
Determined to recover, Cover decides to get a loan from the Manchester branch of the National Development Foundation of Jamaica (NDFJ), a state-financing agency, to not only put her business back on its feet, but also to make it bigger and more sustainable.
Before she finalises those negotiations, however, she collects a referral letter, waiting for her in Kingston, to take to the NDFJ.
That letter has been prepared for her by the Corporate Finance Broker Unit (CFBU) - a relatively unknown entity - and will be taken to the NDFJ in hopes of smoothing the loan process.
"You see, like how I am here now, I have made up my mind to get the loan," Cover tells Sunday Business.
The CFBU is one of the 12 projects set up by the Private Sector Development Programme (PSDP).
Like the PSDP, its secretariat is located at the offices of Jamaica Trade and Invest (JTI) in New Kingston.
The CFBU works as a mediator between the financial institutions and the micro, small and medium enterprises (MSMEs) - in a sense, vouching for the applicants as a risk worth taking, but also advising small operators like Cover how to construct their applications for favourable consideration of their loans.
Mere infant
The CFBU is itself a mere infant, only one and a half years old, with a success rate well below average for its referrals.
Consultant Robert 'Bob' Kerr says the unit was formed in January 2007. Since then and up to March 2008, the CFBU has referred 94 applicants for loans. Only 37 of those loans were approved, or 39 per cent of all referrals.
Still, the majority of the loans approved - 16 or roughly 43 per cent - were from commercial banks, which have been the most difficult hurdle for MSMEs in their fight for equitable access to commercial capital.
Kerr says the successes so far come from the rapport that the CFBU has struck up with financing agencies and lending institutions.
"We have a working relationship with about all the financial institutions in Jamaica," he said.
The CFBU has been lobbying the banks, he adds, to change their practices and be more receptive to small-business owners, who often cannot put up the type of collateral and terms the banks request as backing for the risk they take.
"Security is about what all financial institutions want," Kerr said.
The CFBU's services include business-plan analysis, cash-flow analysis and budgeting reviews, to give lenders deeper insight into the business's potential.
Since the collateral required is often correlated to the level of perceived risk the lender will be taking, the CFBU hopes that by helping MSMEs craft better business plans, the concerns about the operation's future viability and, consequently, its ability to repay the loan, would be allayed.
The service is not free.
One-time fee
Kerr says that the business owner would pay the CFBU a one-time fee of $5,000, which puts the full unit at his/her disposal in his/her pursuit of funding.
The unit is managed by Deana MacFarlane. Its full-time staff of eight includes four administrative workers and three consultants.
One of the consultants, Laurence Adamson, a former banker with the National Export-Import Bank of Jamaica, says that there are many hurdles that small-business owners have to clamber over to get a loan in Jamaica.
He believes that a system of angel financing and venture capitalism - both areas that lend to risky operations but in exchange for a fair chunk of the business - should be introduced to Jamaica to capture those entrepreneurs with good ideas but little collateral.
The banking system is designed to help existing businesses with track records of performance, he said, not micro firms with little cash flow.
"The system acts as a barrier to entry, not by any fault of its own," Adamson said.
Tried-and-tested methods
At a June 30 forum at the JTI, Adamson proposed that businesses look for ingenious, but tried-and-tested methods of increasing cash flow within their firms without beseeching the banks.
Among his suggestions: negotiating extended periods of credit from suppliers; equipment rental instead of purchase; and, advanced payments from customers so as to have at least a percentage of the payments already in hand to increase cash flow and commit the client to the sale.
Cover, who sat in on the forum, says that she has learnt a great deal and believes that her pig-rearing business will get back on its feet with the CFBU's help.
"Things are not so right after the hurricane, but I know that with their help, I will get through," Cover said.
richard.deane@gleanerjm.com
