Colombia Expands Small-Business Loan Programs Even While U.S. Programs Collapse

It’s a tale of two countries: U.S. President Donald Trump announced April 15 that Coronavirus-crisis emergency loan funds to help U.S. businesses meet payroll are exhausted – just as 22 million more North Americans hit the unemployment lines — yet Colombia simultaneously expanded its loan programs by COP$16 trillion (US$4.06 billion).

Colombia Treasury Minister Alberto Carrasquilla announced April 15 that the Board of Directors of the National Guarantee Fund (FNG) made the decision to “create three lines of credit and to implement them very quickly.”

The three new lines of credit “will benefit micro-, small- and medium-sized companies (MSMEs) and independent [sole-proprietor] entrepreneurs in the country, and will include loan guarantees of 90% and 80%,” according to the Treasury Ministry.

According to the Ministry, the first line of credits will help MSMEs to meet payrolls “by granting 90% [payback] loan guarantees.”

Through this program, banks and lenders know that “if something goes wrong, the first resources that are lost are not those of the financial institution, but those that the government put in the form of a guarantee,” he said.

“All those employers who are defending their workers and are honoring their labor contracts receive all that support. And the total sum of that line of credit is COP$12 trillion [US$3.05 billion],” he added.

A new, second line of credit worth COP$3 trillion (US$762 million) includes an 80% government loan guarantee and is directed to support working capital. Rationale: MSMEs are not only affected by payroll obligations, but also by “the need for working capital and the financing of their provisions, their suppliers, etcetera,” Carrasquilla said.

The third new line of credit totaling COP$1 trillion (US$254 million) carries an 80% loan guarantee and will be dedicated to helping independent entrepreneurs, he said.

Commissions on these loans will be slashed by 75% via government subsidiy, Minister Carrasquilla added.

Meanwhile, to date, the Treasury Ministry reports that because of new, recently liberalized lines-of-credit backed by the FNG, “Colombian banks have restructured COP$90 trillion [US$23 billion] in loans for the benefit of the productive sector.”

“At this time, Colombian banks have restructured more than 5.4 million credits” just between March 24 to April 10, Carrasquilla revealed.

In addition to more-generous loan terms thanks to new FNG programs, the government also has liberalized payments of income and wealth taxes to help businesses survive the crisis, he added.

The Minister also highlighted support from Banco de la República (the Colombian state bank) by making decisions to ease liquidity for financial institutions.

“The traditional standard in Colombia is [for banks] to have liquidity availability of the order of COP$8 trillion [US$2.03 billion] to COP$9 trillion [US$2.3 billion]. Right now, there are [funding] availabilities of more than COP$24 trillion [US$6.1 billion],” he added.