Ka Wai Ola - Office of Hawaiian Affairs, Volume 9, Number 12, 1 Kekemapa 1992 — Native Hawaiian Loan Fund gets $2 million boost [ARTICLE]

Native Hawaiian Loan Fund gets $2 million boost

by Pearl Leialoha Page As one of its last acts this year, Congress reauthorized and expanded the OHA Native Hawaiian Revolving Loan Fund through the Administration for Native Americans. Sen. Daniel Inouye was key to obtaining the reauthorization. "My hopie is that this expansion of the fund will enahle OHA to approve many more meritorious loan applications that are received," he said A five-year federal program authorized in 1987 with $3 million, the loan fund will receive $1 million on a yearly basis for the next three years, subject to annual review.

The Office of Hawaiian Affairs has agreed to match that amount for a total of $2 million in additional funding in 1993. If federal funding is approved for the entire three-year reauthorization period, 1993-1996, the fund will have grown to $9 million by 1996: the original $3 million, $3 million in new federal funds and $3 million in matching OHA funds. In addition, OHA pays the program, overhead, so the entire principle is available for business loans. "I have been impressed by the benefits of the fund to Native Hawaiian entrepreneurs and their employees — jobs that did not exist before," Inouye said. "Furthermore, the testimony received by the Select Committee on Indian Affairs has made plain to me and my fellow committee members that the fund has been well-managed and is effectively serving Native

Hawaiians who would otherwise be unable to obtain financing." The program is the only loan fund set up for Hawaiians and administered by Hawaiians. In the two-week period after the announcement of the fund's expansion in mid-October, 81 queries had been received. Currently a little more than $3.6 million has been loaned to 97 Hawaiian-owned businesses on five islands, according to OHA Chairman Clayton Hee. "It is probably the most significant program this office has been associated with in helping many, many Hawaiian people become selfsuffīcient," Hee said. Businesses supported by these loans include agricultural ventures, accounting and secretarial services,

and medical practices, Hee said. The interest rate on these loans is 2 percent below the 6-month U.S. treasury bill, whieh for the last several months has hovered around 3 percent. The maximum amount any one firm ean receive from the loan fund is $100,000. As of September, requests for funding had topped $34.6 million from about 700 applicants. Eaeh month the fund is replenished with $30,000 - $35,000 in payments, whieh is then available for new applicants. "The point of the program is not to provide low-interest loans to Hawaiians," explains Linda Colburn, OHA eeonomie development officer who oversees the program. "The point is to provide money to Hawaiians

who have no other access to capital." Applicants must also show that they have been denied conventional funding from at least two commercial lending institutions. To qualify for a business loan from the NHRLF, the applicant firms must be 100 percent Hawaiian-owned. That means all partners and stockholders must be Hawaiian, though no blood quantum is specified. The purpose of the loan must be either to start up a small business, expand an existing small business, purchase equipment or inventory, or provide working eapilal. It may not be used to acquire land or buildings, construct buildings or purchase equity in private ventures. Also, it may not be used to make loans to another party.

Although taking an entrepreneurship training course is not a requirement for getting a loan, it has been helpful to other applicants, Colburn said. "An applicant must have a lot of personal qualities that are likely to lead to a successful business," she said. Those who have worked in a small business or have managed one bring a lot of skill to starting a new venture, she added. Pre-application packets are availairie from the Office of Hawaiian Affairs. This first step asks for a descriplion of the business, ineome statements, professional expertise and birth certificates. Onee returned to OHA, one of three loan officers eonducts a credit eheek and follows up

with the applicant to review other key elements that routinely are included in a comprehensive business plan. A detailed analysis of the business plan is made to see if other requirements must be met, such as special licensing, permitting or insurance. "It's an evolving process," Colburn commented. "You're constantly checking to see that you've covered all the basics." A enieial part of the analysis will be how the firm proposes to deal with a recessionary eeonomy, she said. It's not enough to identify the market; a successful applicant will also have a plan for capitalizing on that market, Colburn said.

When the loan officer is satisfied that the business plan is sound, he presents it to the loan review committee for analysis. It is then sent back for changes or on to the full advisory board, who may add conditions before authorizing the loan. This process ean take anywhere from two months to two years, depending on how fast the applicant ean provide the information needed and the size of the loan officer's work load, Colburn said. Loan officers are planning neighbor island meetings with loan recipients and interested applicants to discuss ways the program ean be strengthened. They are meeting in Hilo at the OHA office at 688 Kino'ole St. #4A, Dec. 14 & 15 at 8 p.m. and in Kona on Dec. 21-22; eall Kona office, 3297368 for details. Meetings on Maui are yet to be scheduled.