DOC promises flexibility in determining who qualifies for ARPA biz loan program
Pago Pago, AMERICAN SAMOA — Half of the $10 million allocated from the American Rescue Plan Act (ARPA) for the Business Loan Program allocated to the local Commerce Dept. to administer and oversee has been budgeted for the Line of Credit (COL) initiative; while an additional $4 million is going to the Grant and Loan (G&L) program, according to the DOC’s budget for the American Samoa COVID-19 Business Recovery Capital Program (BRCP).
While priority funding targets tourism, travel and hospitality sectors and other impacted industries in accordance with the intent of the ARPA, the BRCP proposal — submitted to the ASG ARPA Oversight Office — noted that these broad categories allow flexibility in determining who qualifies for assistance.
“Small to Medium Size businesses are the lifeline of our island’s economy and livelihood,” wrote Commerce director Petti Tagipo Matila, in the cover letter for the BRCP proposal for funding submitted to the Oversight Office executive director, Keith Gebauer. who announced in late October this year that DOC is designated to administer the business loan program.
And that DOC is required to submit its proposal for intended use of the ARPA funds in compliance with Oversight Office established guidelines.
“American Samoa is an isolated U.S territory located in the South Pacific and is accessible only by air and sea,” Matila wrote. “We need to ensure that our businesses can continuously serve the community, especially given the global COVID-19 pandemic restrictions, [that] is paramount.”
She explained that the proposed revolving lines of credit, loans and grant programs will help restore existing businesses, and encouragw new ones. “The aim is to assist our business community recover from numerous negative impacts since the beginning of the COVID-19 pandemic,” she pointed out.
“The importance of strengthening and expanding our businesses is the plan. The plan also includes the ability to respond to, mitigate and ultimately overcome the impacts of the pandemic. A successful business community will stimulate our economy in its efforts to recover from COVID 19,” she explained.
According to the BRCP proposal, the biggest impact — since March of last year with the border-closure and other restrictions implemented under the COVID-19 declarations — has been seen in the tourism, hospitality, and travel industry.
It points out that nearly all tourism-reliant businesses saw massive reductions in revenues and in almost every case, were forced to lay off staff and close their doors.
“As lockdowns were implemented, local transportation businesses, retail operations, restaurants, and many others all experienced severe losses in revenues,” the proposal states. “As supply chains slowed across the globe, local importers and wholesalers also began to see severe losses in revenues.”
“Most recently, transportation costs have begun to skyrocket as fuel prices have seen significant increases,” said the proposal noting that the rising costs of fuel are impacting the cost of goods across the board and businesses are struggling to meet their consumer’s needs.
HOW IT WILL WORK
The BRCP will be rolled out in two components, the LOC and the G&L programs. And the goal is to provide local businesses, specifically those significantly impacted by the pandemic, with the credit and capital required to respond to the impacts of the virus and support the recovery of the local economy.
DOC explained in the proposal that it will develop policies and procedures to effectively manage these programs so that the programs are sustainable, long-term capital access programs.
The BRCP proposal shows that DOC will partner with the ASG owned Territorial Bank of American Samoa (TBAS) on both programs. Additionally, the proposal provides in detail the role of TBAS and the agreement between DOC and TBAS.
The BRCP proposal explained that the LOC program would be designed so that the ARPA funding will act to fully secure all LOCs issued by the partnering bank.
Additionally, all applications for LOC and G&L will be submitted to DOC for an initial compliance review to ensure the proposed business projects/plans are in line with the goals and objectives of the ARPA funds.
“Priority is given to industries that were heavily impacted by the pandemic, specifically the tourism, hospitality and travel industry,” the DOC document said.
Furthermore, given American Samoa’s geographic location and unique economic impacts due to the territory’s state of public health emergency, priority will also be given to critical infrastructure related industries that experienced shortage of materials and labor due to the global supply chains shortages.
American Samoa’s economy is reliant on imports, and the shipping delays also led to revenue losses and limited supplies for the construction industry on island, according to the proposal.
The BRCP further explains that the G&L program will provide combined assistance in the form of seed funding — grants — that will be based on demonstrated strength of the business plan and proposal, eligibility of use, and how the proposal supports the territory’s response to the negative economic impacts of COVID-19.
The G&L program adds an option to apply for an affordable low interest loan to complete a project that may require more than what the grant provides.
Applications are to be submitted to DOC for initial screening before being referred to a five-member review panel made of both public and private sector representatives.
“The G&L program is one way to encourage innovative business startups and local entrepreneurship to provide goods and services needed during the COVID-19 global pandemic,” the BRCP document said.
The G&L program involves a start-off presentation before the review panel to provide recommendations to fine tune a proposed business idea and a vote on whether or not to approve the applicant for just seed funding or with an option to borrow more through a low-interest loan.
The interest for the G&L program is 3% with an incentive to forgive the rest of the loan for consecutive non-missed payments by 2026.
According to the proposal, the BRCP programs will be designed using pre-existing and proven programs as guidelines. DOC intends to incorporate the LOC program already in use at the partnering bank to fast track the development of the program. The LOC program will be modified to ease the normally required credit criteria to ensure aid to businesses is available quickly.
DOC also intends to model the G&L program after the EDA-Revolving Loan Fund already in operation at the partnering bank, again with modifications to support the overall goal of the BRCP program and to ensure compliance with ARPA regulations and requirements.
DOC explained that the LOC program will continue until December 31, 2022. The G&L program will continue as loans issued through the program are repaid and reissued as per program guidelines. Any and all funds remaining from the LOC program shall be transferred over to the G&L Program.
The budget breakdown shows that $5 million is budgeted for the LOC, $4 million for the G&L, and $1 million for “administration” expenses, which includes personnel costs.
DOC is now receiving public comments and comments must be received by DOC in writing no later than 4pm on Monday, Dec. 13, 2021.
General information sessions are also underway, where the public — especially impacted businesses can ask questions. Check with DOC for details.