The U.S. Treasury Department has approved American Samoa’s modified federal State Small Business Credit Initiative application, which includes the new State Program, called the American Samoa Venture Fund (ASVF).

U.S. Treasury Secretary Jacob J. Lew, according to a news release issued yesterday from the Governor’s Office, gave the approval last Friday. Samoa News understands that Gov. Lolo Matalasi Moliga received word of the approval prior to departing Honolulu for Pago Pago last Friday.

American Samoa’s first application for the SSBCI funds was approved in 2012 with an award of $10.5 million. Thereafter $3.5 million was disbursed, but as of January this year, only $49,100 had been expended for administrative costs.

Last August, American Samoa informed U.S. Treasury that it would submit a formal program modification to replace its collateral support program— which had been done through the Togiola Administration—with a venture capital program by the Lolo Administration.

In the news release, the Governor’s Office calls the newly approved program the “American Samoa Venture Fund (ASVF)” and the entire $10.5 million allocation is re-appropriated for the ASVP. 

Another change to the program is that the Department of Commerce will administer the SSIC and U.S. based companies In-Tek as well as Diamond Venture Fund LP “as contracting entities that administer specific aspects” of American Samoa’s approved program.

According to the Governor’s Office the entire allocation for ASG is to increase the amount of capital made available by the private lenders or investors to small businesses through its Approved State Program.

“To accomplish this, ASG will use its entire allocated funds to support the new ASVF, a state-run venture capital program, which will provide small businesses or portfolio companies with direct equity investments, mezzanine and senior debt financing,” it says.

(According to Investopedia.com, mezzanine financing is basically debt capital that gives the lender the right to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. Since mezzanine financing is usually provided to the borrower very quickly with little due diligence on the part of the lender and little or no collateral on the part of the borrower, this type of financing is aggressively priced, with the lender seeking a return in the 20-30% range.)

Commerce director Keniseli Lafaele and Attorney General Talauega Eleasalo Ale are working closely with the Office of the Director of the SSBCI program to complete the necessary documents to fully execute ASG’s approved program.

Lafaele told Samoa News that more specific details of the program will be released once all the documents are fully executed.

VENTURE CAPITAL

U.S. Treasury says a Venture Capital Program provides investment capital to create and grow start-up and early-stage businesses.

State Venture Capital Programs often take one of two forms: a state-run venture capital fund (which may include other private investors) that invests directly in businesses; or a fund that invests in other venture capital funds that in turn invest in individual businesses.

Many factors, particularly resources and available talent, inform a state’s decision on which form to choose. For example, a state may choose to invest in a large venture fund that agrees to reinvest in that particular state an amount equal to that invested by the state, as opposed to trying to attract that same talent to a smaller fund capitalized with state money, according to the SSBIC website.

Click on attachment below to download complete program profile.