Government and banks agree on $200M business loan scheme

The government and five local banks have agreed in principle on a $200 million loan scheme to help medium- and large-sized businesses with their operating expenditures and debt-refinancing needs.

Under the scheme, eligible medium and large businesses can borrow up to $750,000 and $3 million, respectively.

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

Businesses that obtain a loan will only have to pay interest during the first 12 months and have up to seven years to repay the loan amount. The applicable interest rates are variable at the prevailing Cayman Islands or US dollar prime rate plus up to 1.50%. Currently, the prime rate is 3.25%.

The interest for the first 12 months will be deducted from the approved loan amount and placed in an escrow account.

Presenting the loan scheme at the government press briefing on 2 Oct., Finance Minister Roy McTaggart said it “will provide much-needed relief for medium- and large-sized businesses in the Cayman Islands by providing access to loans which might not otherwise be available”.

He added, “This is another programme developed by the government to provide support for local businesses who find themselves displaced by the continuing effects of the COVID-19 environment, particularly those who operate in the tourism industry. It is my hope that businesses will avail themselves of the opportunity provided by the programme.”

Eligibility

To be eligible for a loan, businesses must be at least 60% Caymanian-owned and established no later than 22 March 2020.

The Cayman-registered companies, Caymanian sole proprietorships or partnerships that can apply must be in good credit standing with their bank and have at least 13 or more employees as at the cut-off date of 22 March.

Medium-sized businesses, as defined by the scheme, have between 13 and 50 employees or a gross revenue of at least $750,000, and large-sized businesses employ more than 50 staff or have a gross revenue of more than $5 million.

Qualifying businesses must also satisfy all credit approval and other requirements of the participating banks.

The banks will charge their usual application, commitment and legal fees and may require businesses to take out insurance covering a sum that is at least equal to the loan amount. They may also require other security from borrowers, in addition to the government guarantee.

The government will be waiving the 1% to 1.5% stamp duty that may be applicable to any charges placed over assets to provide security for the loans. Other stamp duties and normal charges may apply.

Legislative Assembly approval required

The five banks participating in the scheme are Butterfield, Cayman National, FirstCaribbean, RBC Royal Bank and Scotiabank.

The Legislative Assembly must first approve the government guarantee of any loan defaults under the scheme, therefore government intends to present a motion during the upcoming meeting of the House, which begins on 14 Oct.

It is anticipated that businesses will be able to apply for loans under the scheme from 1 Nov.

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