INDUSTRIAL DEVELOPMENT FUND (FDI-HAITI)
Venture loan

 

What is a venture loan? 

 

A venture loan is a performance-based-interest-rate loan. That is, a loan whose cost for the beneficiary is partially indexed to a performance indicator of its own.

 

Who can be granted a venture loan?

 

Any investment enterprise or any project belonging to one of the eligible sectors aforementioned and defined by the « Statement of Policy and Procedures » can get a venture loan from FDI.

 

What is the role of the Financial Intermediaries in an FDI venture loan?

 

The fact that an FDI venture loan is a direct loan to the beneficiary doesn’t prevent the Financial Intermediary from participating to the operation. FDI even encourages its financial partners of the banking sector to participate in every single venture loan. That participation can be effective in several ways:

  1. The « venture » feature of the loan can be applied to FDI’s share in a syndicated loan (co-financing)
  2. The Financial Intermediaries can, on a fee basis, provide FDI with its services in disbursing, recovering the venture loan and managing the collateral, if any, securing the operation.
  3. A commercial bank can, in participating in an FDI’s venture loan, be motivated by the necessity to take advantage of a more favorable treatment of the whole operation by the regulatory authorities, especially in weighing the assets with the aim of establishing and assessing the capital adequacy ratio. Another motivation can be the necessity to comply with the legal requirements regarding pledge on some specific assets.

 

What is the maximum amount of an FDI’s venture loan?

 

The maximum amount for a venture loan is USD 500,000, or the equivalent in local currency at the exchange rate published by the Central Bank (BRH), on the effective disbursement date of the loan.

 

What is the maximum maturity of an FDI venture loan?

 

A venture loan can be granted for a maximum of 3 years with no obligation of principal reimbursement, and a maximum of 2 additional years during which principal reimbursement will be based on the borrower’s free-cash flows-generating power. At the end of the fifth year, the venture loan will be converted into an ordinary loan with a maximum of 13-year-maturity.

 

How is a venture loan remunerated?

 

Remuneration of a venture loan comprises two (2) components: a below-market-fixed component, and a variable component.  The latter is a function of the unpaid proportion of the total loan and an operating indicator, which can be the sales figures, the EBIT or the operating cash flows.

 
What are the advantages of a venture loan for FDI?

 

The advantages of a venture loan for FDI can be summarized as follows:  

  • Possibilities to better fulfill its mission of promoting the creation of news businesses.  
  • Possibility to improve its operating revenues level, thanks to a better risk-interest rate matching, 
  • Opportunity to test and introduce for the first time an alternative financing instrument in the Haitian market.

 What are the advantages of a venture loan for the Financial Intermediaries?

 

Venture loan offers the participating commercial banks a lot of opportunities. The more obvious are:  

  • Possibility to participate in the promotion of the emergence of a new class of entrepreneurs, with no obligation to take a share in the burden, in terms of risks, of such a venture. This participation can be limited to providing FDI with their services in managing the loan account. 
  • Possibility to increase, without taking any additional risk, their operating revenues, while strengthening the recurrent component of their revenues structure. 
  • Possibility to broaden, in the short run, the base of their depositors, given the fact that a venture loan beneficiary will be mandated to open a checking account with the bank managing the loan. In the long run, the participating banks are also given an opportunity to broaden the base of their borrowers, thanks to the first-hand information they have about the clients whose loan account they manage on FDI’s behalf.  
  •  Should a Financial Intermediary be also lender of an FDI’s venture loan beneficiary, its loan, whatever its effective date, has priority over FDI’s. That is, in case of the borrower’s bankruptcy or liquidation, the Financial Intermediary is paid off in full before any payment is made to FDI, in reimbursement of the unsecured portion of the venture loan. 

 What are the advantages of a venture loan for the Final Beneficiaries?

 

The venture loan offers the final beneficiaries four main advantages:

  • The sSemi-variability of the interests on the venture loan is amenable to reduce profit volatility in regard with the sales figures. 
  • Reduction of the financial risk. 
  •  Flexibility in servicing the venture debt. 
  • Access to resources amenable to increase the « gray area » of the balance sheet (quasi-equity).

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