The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government has been urged to more than double its planned small business loan support to $50m amid fears firms may lose up to 60 percent of their sales between now and end-June.

Mark A. Turnquest, a well-known small business consultant, told Tribune Business that while he recognised the "cash-strapped" government's post-Dorian limitations it needed to significantly ramp-up the proposed $20m package to prevent the sector's collapse amid the coronavirus pandemic fall-out.

Warning that small businesses were in for at least "three months of hurt", as tourism and the wider Bahamian economy ground to a halt, Mr Turnquest revealed that more than half his clients had put all staff on half days as an immediate response to the downturn.

And that, he disclosed, was before the prime minister announced the government's 11-day lockdown measures including a curfew and the enforced closure of many sectors in the Bahamian economy.

Mr Turnquest estimated that small and medium-sized enterprises (SMEs) were likely to shed 40 percent of their staff due to the drop-off in consumer demand and spending, and expressed concern over the repayment terms those accessing the government-sponsored assistance facility may face.

He spoke out after the government last week pledged to provide $20m in "short-term loan support" for small businesses as part of efforts to strengthen the Bahamian economy's shaky foundations amid a near-total tourism shutdown.

Some 50 percent of this to be funded by an allocation from the Central Bank's dormant account facility, with monies extended in for several commitments by the recipient business. K Peter Turnquest, deputy prime minister, said last week: "Eligibility would include confirming that the business has been in existence for over one year, a commitment to retain most of the existing staff complement, and a plan to utilise the proceeds of the loan to ensure business continuity."

However, Mark A Turnquest told Tribune Business: "It's not going to work. The $20m is a start, and I know the government is limited in their approach because they are cash-strapped, but I recommend $50m. We would want at least $50m."

Explaining that the tourism shutdown had been felt almost immediately throughout the Bahamian economy, he added: "A lot of my clients are small retailers, clothing stores and electronic stores. They've been closed [by the government's lockdown].

"They're calling me and asking about the $20m, and how to access that. Prior to this ban, 60 percent of my clients had immediately put staff on half days. That was before the prime minister's announcement. I told them they had to do a letter to staff explaining the circumstances, and that there's going to be a lot of hurt and this will not be over immediately.

"This is not one months, two months. This is three months of hurt. I see this as three months' disruption to business..."

Mr Turnquest said the government's planned SME assistance had generated a mixed response from his clients, adding: "One of my major retail customers, who has eight stores, said to me yesterday that they would never get a loan from the government to keep staff working because that doesn't make sense.

"He has to pay the staff and interest to whichever bank loans the money. He said he's not going to be put in a negative position to support staff. One or two others indicated, because they are a little more caring and closer to their staff, that they are going to try and support them for a month-and-a-half but after that, that's it.

"I already told them that three months is the hurt. They gave to decide the business model they want to use in respect of their value chain for the next three months.... The SME is most definitely going to lose about 40 percent of their staff, and 60 percent of their sales. And I'm not talking about the 100 percent they're going to lose to March 3. I'm talking about to end-June; three months of pain."

Mr Turnquest said he was also keenly awaiting the details concerning the $20m small business loan support plan. "The challenge is who to give the money to, how much money they're going to get, and what is the interest and repayment provisions on those loans?" he asked.

"This is not a grant. This is a loan. Eighty percent of my clients indicated it's difficult to pay people for 11 days without making money. I told them they have to look at production and people: The two 'p's'. You know you've got some loyal staff going through hell and high water, but you got to cut your losses and take care of yourself."

Marlon Johnson, the Ministry of Finance's acting financial secretary, told Tribune Business that details of the loan support initiative will be fully released by mid-week. The government wanted companies to begin the application process this week in a bid to ensure funds were received by SMEs "as quickly as possible".

He added that the Ministry of Finance's initial analysis had suggested $20m was sufficient, although this could be changed depending on demand and small business response. He indicated that there will be limits on the size of business that can qualify, as well as sums received, but did not provide any details.

"The focus of this is target those businesses that have more difficulty accessing the formal banking sector," Mr Johnson said. "The working assumption is that the larger businesses have stronger relationships with the commercial banks and a stronger track record."

Acknowledging that the financing available will largely take the form of loans, he added: "I think the effort is to try and make the terms as manageable as possible for businesses. They will be loans but set up in such a way to make the financing as manageable as possible in the circumstances. The details will be finalised this coming week.

"We will try to set it up so that the application process is simple and straightforward, and the response time is a matter of days. We know businesses need that money soon, so we will make the application process and turnaround time as soon as possible."

The government last night said the initiative, which it described as the Business Continuity Loan Programme, would be operated via the Small Business Development Centre (SBDC). It added that application forms would be made available via the SBDC's website.

Mr Johnson said the SBDC will pay a "co-ordinating, logistical role" in the scheme with companies applying direct to financial institutions for the funding. He added that the Ministry of Finance's initial analysis suggested $20m was sufficient, but noted: "As the deputy prime minister said, this is a fluid situation.

"If the demand is greater than we anticipated, the policymakers will have to make a determination. Given our initial assessment, our assumption is that will be sufficient, but it will be subject to review."