Loans & Financing in the Caribbean
There has been a hold on economic growth in the Caribbean due to a lack of innovative businesses to create jobs. To build a startup, launch, develop, and grow it takes money, and with few financing options for small businesses very little progress can be made, aside from occasional sporadic angel investing.
Venture capital and private equity are slim to none.
There are some commercial bank loans, but these often require large collateral, and they often cannot offer nearly as much funding as is required, especially after the most recent hurricane season. Not just Puerto Rico, but six other islands are in need of rebuilding. For example, a loan of over $60 million was needed for construction in the Bahamas. The largest loan available to this particular company was $4 million – hardly adequate.
Global Financial Crisis Remnants
While it’s been a few years since the global financial crisis, the following recession hit Caribbean banks hard with problem loans – loans 90 days or more past due. The ratio of these vs total loans tripled between 2007-2016, and while these numbers have come down from peak levels (15-20% vs 5% pre-crisis, 3-4% in Latin America), it’s been a slow recovery.
Because the few lending opportunities are dominated by banks, and as these banks work on cleaning up their balance sheets, the availability of credit has become slim and lending standards more strict. As banks lend less, economies weaken, which can become a vicious cycle resulting in more problem loans.
For anyone looking to build new hotels, in particular, considering a few islands’ lengthy recoveries from the hurricanes, funding is still minimal. Other reasons behind this, besides the weather, has to do with the reliance on leisure and tourism demand.
The perception of investing in these types of areas already skews toward being riskier than other more developed areas. Another reason there is such a lack is the lending gap left from many large Canadian banks leaving without anyone to take their places.
How to Get Approved
One solution for anyone wanting to invest in these beautiful areas would be a conversion project rather than a brand new, ground-up construction. The building process is known to be very slow in the Caribbean, so renovation and rebranding already existing hotels and other buildings is often more attractive to lenders. And even when conventional lending isn’t an option, non-traditional lending options can be an attractive alternative if that’s what it takes to get the deal done.
Bellwether Funding has spotted this need for loans and adequate funding for rebuilding and economic expansion. We’re prepared to offer our loan services, from conventional loans, bridge loans, hard money, and private money.
Contact us today to see if you qualify and let us be a partner in your business’ growth.