Small Biz program to close down later this month
The federal State Small Business Credit Initiative (SSBCI) program, administered locally by the Commerce Department, will cease at the end of this month but American Samoa still has the rest of the year to utilize the more than $3 million it has drawn down.
American Samoa was awarded $10.5 million several years ago for the SSBCI, but efforts to get the program off the ground have been met with obstacles.
Under the revamped program by the Lolo Administration in 2013, it is now called, the American Samoa Venture Fund.
Commerce director Keniseli Lafaele told a House committee hearing in April this year that $3.5 million is currently available for the local program, which requires investors or financial institutions to invest by matching the federal money awarded to each business.
At the time, four or five businesses had their applications set to go through the six-member Venture Fund committee review. When asked what types of businesses submitted applications, Lafaele told Samoa News he couldn’t comment on the specifics, but said that these are the types of businesses that would create employment, generate government tax revenues, import substitution or export opportunities, and new monies for the economy.
The most difficult task faced by American Samoa, is securing investors, and/or financial institutions to provide matching funds - as required for the SSBCI.
Over the past several days, Samoa News has received several inquiries regarding the status of the program, with some claiming that the US Treasury Department, which funds the SSBCI, is set to close down the program before the end of this month, and American Samoa would not be able to tap into its share of the $10 million awarded several years ago - during the Togiola Administration.
Responding to Samoa News questions, Lafaele said yesterday that the SSBCI program sunsets on Sept. 27th, as per legislation that created the program; and efforts to extend the program with another infusion of $1.5 billion beyond the sunset date was not considered by the US Congress nor is it a part of President Trump’s agenda.
Lafaele reconfirmed that ASG received $3.5 million of the allocated SSBIC funds, and explained that American Samoa’s allocation, like other states and territories, was to be received in three tranches- as each tranche is deployed, the next tranche is received until the balance is fully deployed.
He emphasized that the SSBCI “is a matching program”, that is, federal money - SSBCI - is matched with private capital - equity or debt, or both.
“And there lies the difficulty in getting our programmatic allocation of $10.5 million fully deployed, let alone the first tranche received. There is a lack of capital market in the territory to provide the required private matching,” Lafaele said.
The lack of available capital market has also been raised by Gov. Lolo Matalasi Moliga, to the federal government as well as Fono leaders. In a letter last month to the US Government Accountability Office, the governor said the ASG’s Debt Structure is the direct result of limited options available to access venture capital to build our economic development infrastructure. (See Samoa News Aug. 18th edition for details).
When asked how many projects/businesses were approved for funding, Lafaele told Samoa News yesterday that, “there's no shortage of projects that applicants submitted applications for; and we've screened applications carefully based on financial viability and sustainability, employment to be created, and access to private matching.”
Regarding the types of projects/businesses approved for funding and the average amount allocated for them, Lafaele said he will provide information when a final decision is made to deploy funds for approved businesses.
When asked if any projects/businesses have been awarded any money, Lafaele said, “not yet. We have two or three that should receive funding in the next 30 days; then a few more after that. We aim to deploy all the SSBCI funds we have before the end of the year.”
He explained that the Sept. 27th sunset date doesn't mean American Samoa has two weeks to use the funds it has or lose it.
“We have the rest of the year to deploy funds prudently and according to the ASG SSBCI program plan approved by the US Treasury,” said Lafaele, adding that although the SSBCI office in Washington D.C. ceases to exist on Sept. 27th, “we were informed the US Treasury Office of Inspector General’s role in this program continues to a certain date.”
Samoa News also asked if there are any other government funding sources available for start-up businesses or businesses looking to expand operation. This is a question that has been posed by some local residents looking to start a new business, and others wanting to expand but claim they are having a difficult time securing financial assistance from the private banks and the Development Bank of American Samoa.
“With Gov. Lolo Matalasi Moliga’s approval, we aim to make the American Samoa Venture Capital Fund a permanent and viable business financing tool in the territory - beyond the SSBCI program,” was Lafaele’s reply.
“This opportunity should not die with the SSBCI program, rather, the SSBCI can be a launching pad for our own venture fund- ‘when one door closes, another one opens’.”