Growth & Jobs | More funding on the way for small businesses
Obtaining funding for entrepreneurs in the creative industry can be challenging.
Just ask St Andrew-based natural jewellery maker Imogene Reid, who discovered this when she approached several institutions for loan funding a few years ago. The owner of Natural Jewellery by Cherry has been making craft items since she was nine years old.
"Most of the financial institutions said I had no collateral and others said that what I did as a business didn't qualify me for a loan," she explained. "In one instance I got assistance, but I was treated so badly that I didn't go back."
The entrepreneur learned that the output of her non-traditional creative business did not receive the same recognition as businesses with tangible assets, such as equipment and land, to serve as collateral for loans.
"I found that most of them don't see what you do as important, although I have done exhibitions outside of Jamaica, in countries such as Mexico and Suriname, and they appreciate our work," she said. "Here in Jamaica, it is another matter."
That was until she approached JN Small Business Loans (JNSBL).
ACCEPTING NON-TRADITIONAL FORMS OF COLLATERAL
Gillian Hyde, general manager, JNSBL, said her company is actively looking at ways to accept even more non-traditional forms of collateral, such as intellectual property, future crops and receivables, to better assist clients.
"We have always used items such as household furniture, appliances, tools and machinery and other non-traditional forms of collateral," explained Hyde.
"However, we are now exploring other forms of collateral, such as intellectual property, crops and other receivables, which would give more entrepreneurs, particularly persons in the agricultural and creative sectors, greater access to credit," she outlined, explaining that such categories might only be acceptable in certain circumstances.
The Jamaica Intellectual Properties Office (JIPO) has been in discussion with the Government and financial institutions as part of plans to include intellectual property as collateral for persons seeking funding. The office noted in 2016 that most banking institutions required land titles to register a mortgage, in order to grant a loan. However, as financial institutions engage more with the creative micro, small and medium enterprise (MSME) sector, the use of intellectual property should become a part of the collateral pool.
Hyde noted that the National Security Interests in Personal Property Registry allows for the registration of movable assets, including some non-traditional property, and is administered by the Companies Office of Jamaica.
"The Security Interests in Personal Property Act makes mention of these non-traditional forms of collateral. And, therefore, more financial institutions should examine them, to determine how more entrepreneurs with such property can be assisted," she added.
"Many persons, due to the direction of technology, are investing in new forms of property; hence the need to also examine how these can be used as collateral."
... Partial Guarantee Programme assisting members of the agricultural sector
JN Small Business Loans (JNSBL) General Manager Gillian Hyde noted that already, through the Development Bank of Jamaica's (DBJ) Credit Enhancement Facility Partial Guarantee Programme, more MSMEs stand to benefit from funding.
"We have used the DBJ's Partial Guarantee Programme to assist members of the agricultural sector. What this programme does is to provide a guarantee of up to 80 per cent for persons who have challenges with providing collateral. And, we believe even more persons can benefit from this facility," she explained.
"Credit is available. However, more persons need to educate themselves about how they can obtain these funds based on collateral they own; and lending institutions should also play our part in making the process smoother."
Hyde adds that a good relationship is also important in assisting clients with non-traditional forms of collateral.
"We have found that most are serious about their businesses and honour their commitments. In talking to Miss Imogene Reid, we were able to assist her by accepting a non-traditional form of collateral, and she is doing well," she said.
Reid, a St Andrew-based natural jewellery maker, has since been able to expand her jewellery-making operations.
"I have a good relationship with JNSBL and they have assisted me with growing my operations since I approached them a few years ago," she stated.