EDB unveils 2 financing programs for gov’t contractors
The Economic Development Bank for Puerto Rico recently unveiled two new financing options for local and federal government contractors, with the goal of promoting procurement, agency President Joey Cancel said.
At present, the agency provides up to $10 million in financing to cover between 80 percent and 90 percent of operating capital, when the contractor submits as collateral the contract they have signed with any local or federal agency to supply products and services. The loan is offered at an interest rate of between 6.50 percent and 10.75 percent based on the case analysis.
The EDB has created a new revolving credit financing option through which it provides cash advances based on account receivables held by local and medium sized businesses that participate in the Government Reserves Program. This product allows suppliers to transfer to the EDB the job of collecting recent government invoices to guarantee repayment of the credit advances. This loan offers from $10,000 to $300,000 in funding at a preferential interest rate — or prime rate — requires a minimal contribution, and only requires the assignment of accounts receivable as collateral.
The EDB is also in talks to establish an accounts receivable financing tool through the private sector, also known as “factoring.” As a complement to the financing product extended to state or federal contractors, the EDB is looking to establish a partnership with a company dedicated to this type of transaction through a referral system to provide financing for accounts receivables to companies that sell products or provide services to the private sector.
“Factoring” is the financing of accounts receivable generated by a company that does business to business transactions. With this product, a business can access a line of credit for working capital based on their monthly invoicing, without requiring collateral property. The “factor,” or allied company can advance between 70 percent and 80 percent of total accounts receivable no more than 60 days due in most cases. Once the invoice is collected the “factor” releases the retainer, minus the interest generated.
“At the EDB we support procurement from local suppliers. That said, from Fiscal 2012 through the present, 99 percent of our purchases have been earmarked for local suppliers,” said Cancel, noting the agency has spent nearly $1.8 million in procurements, giving priority to Puerto Rico businesses.