While they are not the cheapest source of funds, local commercial banks do offer a range of solutions for small businesses in need of cash or credit for business support.

It's a good idea to shop around in search of the loan solution which best fits your needs. But, be warned: the banks sell credit at rates of up to 25 per cent or more, but they also have facilities that are way cheaper, at about 8.625 per cent - the lowest quote that surfaced in a Sunday Business survey.

making money

You should know that commercial banks, as other financial entities, are in the business of making money and might not - at first blush - tell you about the product that is cheapest. So ask.

Instead, they will look at what you can afford and might tell you about the product from which they will make the most profit.

It is your responsibility to probe deeply and so secure for yourself the best deal, based not only on what you can afford, but also on what is best for your business at this time.

Make sure to ask, as well, about each bank's commitment fees and equity requirements - that is, the money it takes to 'buy' the loan and which must come from your pocket - and which might be required for the loan to be disbursed. Compare charges across banks. They can be steep, running into tens or hundreds of thousands, depending on the size of the loan.

A $2 million loan, for example, can incur fees of $40,000 to $50,000, which the borrower has to pay upfront before the funds are disbursed by the bank.

You may also be entitled to special interest rates and other concessions based on your credit history with the bank or on the nature of your business operations.

'MSME Alliance'

For example, financing for small- and medium-size enterprises (MSMEs) is available if you are part of the 'MSME Alliance' - a group comprising 22 member associations, including the National Association of Hairdressers and Cosmetologists, Hardware Merchants Association, Jamaica Wood Products and Furniture Association and the National Association of Taxi Operators.

For this network, the Bank of Nova Scotia offers registered and paid-up members a maximum of J$5 million and a minimum of $1 million in credit.

Depending on the risk profile, interest rates will range from 8.625 per cent to 10.875 per annum. The more likely you are to repay the loan without default, as determined by the bank, the lower the interest charges are likely to be.

The loans are for five years.

In association with the Development Bank of Jamaica, National Commercial Bank of Jamaica (NCB) offers to small business operators a special line of credit with maximum loan amount of $15 million.

Interest is fixed at 10 per cent per annum for the duration of the loan for producers of goods and services established and operating in Jamaica. The repayment period is up to seven years, including a maximum of 12 months moratorium on principal payments only.

deal-breaker

Since your business plan - which sets out your target market, location, the costs of inputs, overheads, your cash flow and possible profits - can be a deal-breaker when searching for a loan, it might be a good idea to get this done by an expert or obtain assistance from an agency like the Jamaica Business Development Corporation (JBDC) in its production.

Documents which you might need to get before getting a loan include details of the proposed project or a business plan and your current audited/draft financial statements. Others are cash-flow projections with supporting notes and assumptions; a valid Tax Compliance Certificate; where applicable, evidence of ownership of collateral, for example, title for property or car; and insurance over collateral offered.

Now for the footwork on the best small-business loans

1. First Global Bank

First Global Bank offers between $100,000 and $500,000 to small and medium entities (SMEs), repayable over four years. The interest rate varies; 9.75 per cent variable or 10.75 per cent fixed for three years. Commitment fees will amount of two per cent. After the first year, there is an annual review fee of 1.5 per cent.

In conjunction with the Ex-Im Bank and DBJ, it also offers loans of a maximum US$500,00 over four to 10 years at the following rates of interest:

Manufacturing - 10-12%

Agro Processing - 12%

Agriculture - 7.875%

General Trade - 16%

2. Bank of Nova Scotia

Bank of Nova Scotia offers

$100 million for start-up businesses called Scotia Running Start at a rate of 9.875 per cent; $100 million for the MSME Alliance - the ScotiaMSME Alliance Fund - at a rate of 8.625 per cent to 10.875 per cent; and $200 million for new and existing enterprises - the ScotiaBusiness Builder - at a rate of 8.625 per cent to 12.125 per cent.

ScotiaRunning Start is intended for borrowers who are classified as small to medium-size businesses, operating for less than two years. These are businesses with a maximum of 25 employees and J$105 million in projected annual revenues. Beneficiaries of this fund can use it to acquire new capital equipment, finance working capital, purchase inventory and cover short-term cash needs and accounts receivable, and build business management capacity.

Scotiabank will finance up to 90 per cent of the start-up costs, up to a maximum of J$7.5 million and a minimum of $2 million per business. Interest rate will be fixed at 9.875 per cent for a maximum loan term of seven years. A moratorium on principal will be considered for a period of two years with repayments in 10 semi-annual instalments over five years as an option.

3. National Commercial Bank

For NCB, SME card merchants who have been settling with NCB for at least 12 months, and who have realised total debit and credit card volumes of at least J$500,000 or US$8,000, there are several loans available to support their operations, either for working capital support or capital expenditure.

The minimum loan amount is: J$100,000 or US$2,000. The maximum is nine times your monthly credit card sales, up to a maximum of J$5 million or US$80,000. The repayment period is 36 months.

NCB also offers overdrafts and credit cards which are limited to 100 per cent of your average monthly point of sales or electronic device channel transactions for the last 12 months, up to a maximum of J$2.5 million or US$40,000, at the following rates of interest:

JMD loan - 25.45%

JMD Overdraft - 21.45%

USD loan - 14.45%

Another NCB product is Business Grow, which is intended for business expansion or restructuring and capital expenditure on machinery, equipment, building acquisition or development projects. The minimum you can apply for is J$1 million or US$20,000. The maximum is J$15 million or US$250,000.

The repayment period is up to eight years, inclusive of a moratorium period of six months on principal payments only. Interest charges range from 21 per cent to 21.75 per cent.

NCB's Development Access Facility is a product intended for registered SMEs engaged in manufacturing, hotel/tourism, agriculture/agro-processing, craft, mining, IT and Intellectual Property industries. This is to be used for working capital support, equipment/machinery purchase, fixed asset acquisition/improvement, business expansion projects.

Loan amounts range from minimum J$800,000 or US$10,000 to a maximum of J$40 million or US$500,000.

The interest charged by NCB for JMD facilities is 18.50 per cent, and for USD loans 10.75 per cent. Those rates are available to customers of the bank. Non-customers pay interest of 20.50 per cent on JMD loans, and 12 per cent on USD credit.

avia.ustanny@gleanerjm.com

Some loans on offer from local banks:

'You may also be entitled to special interest rates and other concessions based on your credit history.'