Puerto Rico’s largest bank is putting its money behind start-ups through an innovative program that is already generating some interest among entrepreneurs.
More specifically, Banco Popular has allocated $1.6 million to address the needs of the island’s start-ups, the bank’s first initiative specifically targeting this entrepreneurial sector, according to Vivien Montañez, first vice president of business banking in charge of overseeing lending to small and mid-sized companies.
The program, which kicked off in November and runs through Jan. 31, combines lending with support tools such as regular coaching to boost the entrepreneurs’ chances of success.
When asked why such a short window for soliciting these loans, Montañez replied that the bank wanted to motivate businesses to seize this opportunity.
“We wanted to light the spark that ‘yes, I can’,” Montañez said.
Start-ups can borrow up to $50,000 to be paid over four or five years. The loan interest is competitive, she said.
Currently, 14 loan requests are under evaluation. Montañez said the start-ups span retail services, food and beverage, technology, and medical services.
“There are some proposals that are pretty interesting, some are different,” Montañez said. One thing in common: all seek to borrow the limit, or $50,000.
“People complained that banks don’t lend to start-ups,” Montañez said, noting that a start-up’s credit history or inadequate experience in the marketplace can limit a company’s access to financing. A bank’s regulatory requirements can also pose a hurdle in lending, she said.
For purposes of the program, Banco Popular is being more flexible in its terms. For example, loan payments are lower during the first year, which she said, “helps the cash flow of a business.”
Montañez said start-ups will have access to coaching for the duration of the loan. To provide this service the bank has engaged One Hundred Ventures Business Accelerator, a company dedicated to business coaching for the past decade. Start-ups also can access business educational material at Banco Popular’s start-up website.
Entrepreneurs will meet with a coach each month and discuss whatever areas they need to work on, whether it be marketing, changes the business needs to make, strengthening weak areas, or others. Ultimately, any final decision lies with the client not the coach, Montañez said.
Banco Popular’s initiative can be seen as en effort to help boost Puerto Rico’s economy as it enters its 10th year in recession.
“The situation is challenging. We look at this year with a lot of caution. Whether we like it or not, the economic situation affects business,” Montañez said.
In terms of small business lending, Banco Popular last year managed to generate close to $90 million in new loans and to keep its delinquency “stable and controlled,” she said. (Small business loans range from $10,000 to $500,000.)
As for this year, “our expectations are to reach the same results,” she said.
To request financing under the start-up lending program a start-up must be generating income for two years or less. The information required by the bank is tantamount to a business plan.
Montañez noted that each start-up is evaluated on how well it is structured, whether there is a market for the product or service, and projections for growth.