The Legislative Assembly approved a government motion for a $200 million loan scheme to help medium- and large-sized businesses with their operating expenditures and debt-refinancing needs.
Under the initiative, medium-sized businesses can borrow up to $750,000 and large businesses up to $3 million from five participating retail banks.
Government guarantees 50%, or up to $100 million, of the loans.
During the debate of the motion on Wednesday, members of the Opposition called for both an expansion of the scheme to small businesses, as well as restrictions on companies who had or were going to make Caymanians redundant.
The Opposition requested that loans should also only be given to businesses that were in compliance with the Department of Labour and Pensions. Opposition MLAs cited complaints by constituents that they had been unfairly dismissed and that businesses had not paid their pension contributions.
Premier Alden McLaughlin noted that there is already a process in place under the Labour Law to deal with illegal activities in the labour market.
Finance Minister Roy McTaggart added that there is a real risk that many businesses will not be in compliance with the pension requirements but that they would be able to access and use the loans to make themselves compliant.
McTaggart said he did not want to put further restrictions and requirements on the banks or the borrowers in terms of which businesses are eligible. “We have to give them the opportunity to get back on their feet.”
He said the purpose of the loan programme was “to assist Caymanian businesses who are genuinely in need”.
Responding to demands to restrict loans only to Caymanian businesses, he said, “It doesn’t matter to me and it doesn’t matter to this government whether the business is 60% or 100% Caymanian-owned,” because both were Caymanian businesses under the law.
He said small businesses were not part of the scheme, because they are covered under the small-business grant programme, which still had $4 million of funding available. These grants do not need to be repaid by the companies.
McTaggart added that government believes small businesses are “adequately covered” by that initiative. “If necessary, we can top up this programme to help them.”
The Cayman Islands Development Bank was also making loans to small- and micro-businesses on concessionary terms, he said. “We believe they are being helped in a direct and more beneficial way.”
Responding to a question by North Side MLA Ezzard Millar why the government guarantee was needed at all, if the applicant had to be in good standing with the bank, the finance minister said government wants to ensure that these businesses will continue to be viable when the loans are made out.
Neither the government nor the banks want to guarantee loans to entities that are already in a state of default. “These are high-risk loans,” he said. “In the current environment businesses are going to continue to fail.”
Loan and mortgage deferrals were coming to an end and businesses would need support with their operational costs until the economy fully reopens and businesses can get up and running again.
He said government cannot force the banks to waive their fees, but it can control the government stamp duty that has to be paid on a loan. Waiving the government fees was another way to assist eligible businesses.
Government does not have any authority over the loan-approval process of the banks. The banks can ask the borrower for security for the portion of the loan that is not guaranteed by the government.
The finance minister said the participating banks would have regular reporting obligations to the government about the performance of loans.
Government did amend the motion at the request of the Opposition with regard to the authority given to the finance minister to allow other financial institutions to participate in the programme. The amendment added that these financial institutions must be regulated by the Cayman Islands Monetary Authority.
The finance minister said he was made aware that there are entities in Cayman that are making loans to businesses and individuals which are not regulated by CIMA and government therefore accepted the addition.
Businesses that obtain a loan will only have to pay interest during the first 12 months and have up to seven years to repay both the principal and interest. The applicable interest rates are variable at the prevailing Cayman Islands or US dollar prime rate plus up to 1.5%.
The banks participating in the scheme are Butterfield, Cayman National, CIBC FirstCaribbean, RBC Royal Bank and Scotiabank.