Finance general manager Prakash Dhanrajh admitted recently
that the company has a selfish motive for helping
companies that may not be attractive to banks.
we could get hold of these companies and make sure they
are properly set up, they will come back to us for more
business, he said.
The company is seeing a pick up in the T&T economy first
hand, with clients coming from a number of sectors, from
manufacturing to cleaning services to agro processing.
There are also a number of individuals who approach the
company to expand. People who offer transportation or welding
services, for example, who use DFL to buy new equipment.
Dhanrajh doesnt see anything wrong with lending to
individuals who are not incorporated.
youre talking about encouraging business enterprise,
you have to encourage business first before you formalise,
he said, adding that incorporation can be expensive.
There is a certain amount of risk in dealing with people
who might not qualify for commercial bank loans. DFL, in
fact, charges for that risk, usually one to 3.5 per cent
above prime, but small businesses are usually more knowledgeable
about the industries in which they operate.
of the key things about lending to smaller businesses, with
big businesses they might be going into unfamiliar territory,
Dhanrajh said. With smaller businesses they know already.
If someone came to us who knew nothing about fabrication,
for example, we probably would not touch them.
While DFL does take an equity position in some of its clients,
the company usually prefers to go the loan route. Even when
there is equity participation, there is usually a debt component
to the deal.
should really be a last resort, Dhanrajh said, adding
that when things go wrong, lenders are the first to get
their money. As an owner of the company, DFL would have
to hope that there is money to cover its investment.
concept of equity is that it has to be best way of getting
In many cases the money to invest comes from DFLs
Emerging Enterprises Venture fund, a trust fund that supports
short-term and long-term loans and some equity investments
up to $250,000.
The eligible businesses have to have an asset base of less
than $2.5 million excluding land and buildings.
The company was unwilling to divulge how much the fund is
worth but business analyst Gerard Edwards said it is self-sustaining.
As required by law, the fund expires in 2030. At that point
DFL will either renew it or look for somebody else to take