CDA to streamline micro-loan requirements

THE Commonwealth Development Authority is planning to pare down the requirements for the micro-loan program.

CDA Executive Director Manuel A. Sablan said CDA is now preparing a draft amendment of the regulations as it relates to micro loans.

Sablan said among these amendments is a reduction in the number of bank denials before a borrower becomes eligible for CDA’s micro loan program.

The regulations require that a borrower’s loan application be declined by three banks before he or she becomes eligible to apply for the CDA loan.

Right now the regulations stipulate three bank denials,” he said.

He said CDA is looking at bringing this down to one denial.

For its micro-loan program, CDA has $700,000 in available funds.

In lifting the moratorium it imposed on its loan program, CDA considered the plight of small businesses needing assistance.

Based on initial discussions, the agency considered that in lifting the moratorium, it would no longer engage in a direct-loan program; instead, it would be a micro-loan program in the form of a guarantee.

CDA earlier considered a micro-loan program of up to $35,000.

The proposed program would allow borrowers to obtain up to an 80 percent loan guarantee for a commercial loan. The borrower would apply to a bank for a commercial loan with CDA’s 80 percent loan guarantee.

Based on these initial discussions, the maximum that would be guaranteed by CDA was $25,000, subject to approval of the executive director.

Loans of up to $35,000 would require board approval.

According to CDA’s website, www.developcnmi.com, applicants may borrow up to to $25,000.

The program encourages “starting and expanding businesses in manufacturing, retail, wholesale, fishing, agriculture, marine, & green energy” to apply.

The maximum loan term, CDA said, is 5 years with an annual interest rate of 7 percent.

The website also states that CDA requires all appropriate business assets, personal guaranties and personal assets necessary to collateralize the loan.

“Business borrowers must receive certification from the Small Business Development Center (SBDC) on the review of the loan proposal and business plan,” the website states.

The requirements include a complete application form; a business plan with details on the use of loan proceeds;   business financial statements; tax returns and filings for the past three years; an interim financial statement not older than 90 days; projections (at least one year) including Day One Balance Sheet for start-up businesses; personal financial statements for principals with 20 percent or more ownership and personal tax returns for the past two years.

For more information, contact CDA at 234-6245.