During the current economic crisis, many small businesses are leaving free government assistance money on the table.
The Cayman Islands Centre for Business Development has so far only received 320 applications for grants that pay struggling businesses three monthly payments of $1,000 as working capital support.
The centre has allocated funding that can help 3,000 businesses pay some of their bills as most of them are unable to operate during the lockdown. The money does not have to be repaid.
Althea West-Myers, the director of the centre, said the grant programme has been dogged by misinformation spread by third-party service providers. This included the erroneous assumption that only 100% Caymanian-owned businesses qualify. That is not the case, she confirmed. Any small business with 12 or fewer staff, including the owner, and an annual turnover of less than $750,000 can apply for a grant.
The application process consists of simply submitting a form, for which the businesses do not need the help of intermediaries. “The grant application is a very simple form. It does not require any assistance. You do not have to provide any financial statements either,” West-Myers said.
The director said the centre is taking steps to correct the misperceptions around the programme. As a result, application numbers picked up by 50% last week.
Applicants must have been operational for at least 12 months and be able demonstrate that their business is operating in the local market. If, for example, the business has been mostly dependent on tourists, it must show that it can make the transition to cater for residents.
Only 13 of the 320 applications have been denied so far.
This low number of denied applications shows that there are few obstacles for small businesses to qualify for a grant. The only refusals involved companies without a valid trade and business licence and some that could not articulate a strategy for attracting a larger share of the domestic market.
The head of the business development centre said it is important to understand that the programme is not a stimulus package. It is intended as a short-term measure to help businesses stay afloat.
According to the government, a more-comprehensive package of measures designed to incentivise small businesses is expected to come later.
The $9 million grant programme is part of the government’s relief measures for micro and small businesses announced by Commerce Minister Joey Hew in April.
The package also includes a $5 million programme that will extend loans through the Cayman Islands Development Bank of up to $20,000 for micro businesses of not more than four employees, and up to $50,000 for small businesses of up to a dozen staff.
The loans will cover 80% of a proposed project. This means business owners will have to source the other 20% themselves. They also need to provide security covering 125% of the loan amount, for example through a registered debenture supported by a lien over business assets, high-quality receivables or a guarantor.
After a six-month moratorium on interest and principal payments, the interest rate on the loan will start at 1% and increase to a maximum of 4% over the five-year life of the facility.
Loan recipients are also enrolled in the centre’s free technical assistance programme, which uses industry volunteers to help businesses overcome the current economic turmoil.
The hurdles that businesses need to overcome to qualify for a loan are higher than for the grant programme. The loans are disbursed by the Cayman Islands Development Bank, which is subject to a dedicated law that restricts who it can lend to. As a result, only 100% Caymanian-owned businesses can apply.
The requirement to find security for 125% of the loan amount is another obstacle that has hampered demand for the loans.
Many businesses first tend to explore new commercial loan facilities, where much of the required due diligence has already been carried out by the banks. Commercial banks have also been offering loan deferrals which have bought companies some time.
West-Myers believes some potential applicants have also opted to access some of their pension funds to meet immediate working-capital needs. “In addition, as the economy is slowing opening back up, some business owners are hoping to see if they can withstand the economic impact of COVID-19 without the need to incur any debt,” she said.
Still, 34 business have applied for loans, mainly for capital expenditure and to cover payroll, inventory and other operational expenses. Other small businesses are seeking loans to pursue new business strategies and transition to the domestic market.
The Centre for Business Development is an entity under the Ministry of Commerce that opened in March to provide support to businesses across the Cayman Islands, especially during the COVID-19 pandemic.
The small business grant programme
What can the grant be used for?
The funds can be used to cover working-capital expenditures/operational costs of a business. This includes paying rent and salaries, and purchasing raw materials, equipment and supplies.
What criteria must businesses meet to qualify for a grant?
- Must have been operational for more than 12months
- Must meet definition of small and micro businesses as per the Trade and Business Law (for micro businesses – four or fewer employees, not including the owner, AND gross revenue of $250,000 or less; for small businesses – up to 12 employees, not including the owner, AND gross revenue of up to $750,000)
- Must serve the domestic market or indicate that they are able to transition to a larger share of the domestic market.
- Must have at least 60% Caymanian ownership.
What documents are needed?
- A valid Trade and Business Licence
- Two forms of personal ID
- Evidence of business transactions in the last 12 months or three months of bank statements
How to apply
Application forms are available online through www.gov.ky/coronavirus or by emailing [email protected]