The Puerto Rico Economic Development Bank (EDB) received a $30 million allocation from the Department of the Treasury to expand the “Boost Your Business” programs of the State Small Business Credit Initiative (SSBCI), which will invest in emerging and expanding companies.
These will support the new Venture Capital Program known as the Puerto Rico Venture Capital Access Program (VCAP), which will be implemented with the support of the Puerto Rico Trust for Science, Technology and Research (FCTIPR).
The program will allow the BDE to invest in qualified companies that have already secured private capital and completed a formal evaluation process.
“This $30 million is intended for us to become agents of venture capital investment in the marketplace. To be able to impact entrepreneurs in Puerto Rico, small and medium-sized businesses, up to $2.5 million (in revenue), who do not necessarily have access to traditional capital through loans. Through these funds they can apply for it, and we serve as investors, providing a maximum of 50% of what is needed for new and expanding businesses,” explained BDE President Luis Alemañy in an interview with The News Journal.
According to Alemañy, this allocation is a recognition from the federal government of the success of the Puerto Rico government managing funds under the Cdbg-dr programs and for being one of the jurisdictions with the best and highest use of SSBCI funds.
“For the past three and a half years, the bank has gone through a transformation process where it was able to capitalize a large negative number. The capitalization was at minus $44 million, and that changed to $133 million plus by 2023. In other words, the financial statements are favorable. Likewise, the Cdbg-dr funds, from $12 million at the beginning of 2021, we are now at $144 million, which has supported over 50,000 jobs created and retained,” said Alemañy.
Although the funds for the venture capital program will be available for companies from different industries, Alemañy highlighted that the three sectors in which he has seen the greatest growth, according to those that have been applying for financing at the BDE, include service, tourism and manufacturing businesses.
Lucy Crespo, FCTIPR’s chief executive officer, explained that the process will be open to companies with fewer than 350 jobs and less than $20 million in annual revenues.
“Access to capital is the number one need that our entrepreneurs and small businesses in Puerto Rico have. So this is an alternative mechanism where people can invest. It is venture capital, and obviously, it has certain conditions, so it is important that all those who are going to apply, get all the information. We will be offering this training. It is a unique mechanism that we did not have before in Puerto Rico, and I truly understand that history is being made with this,” Crespo said.
It should be noted that venture capital is a financial operation in which capital is provided to startups and companies with growth potential and high levels of risk in exchange for a percentage of participation. Furthermore, it is one of the main sources of financing for companies that are in the growth phase and that have previously used other sources of financing such as seed capital.
Participants will also receive support and access to resources from the Trust’s Parallel18 business support program.
Héctor Girau, executive director of Parallel18, said the potential number of entrepreneurs that could benefit from such funds is uncertain; it will depend on the number of applicants they receive.
“This is not to make a one-time investment, but rather that once the fruit of the investment is harvested, the same capital can be reinvested,” explained Girau.
With this in mind, the BDE will reinvest the $30 million in other businesses once they begin to redeem the investments, to support the creation of more businesses and jobs on the Island.
The performance of the companies will be monitored by the BDE, ensuring that the funds are invested in accordance with existing federal Treasury guidelines.
Investment decisions will be made by a seven-member committee, with two representatives from the BDE.
Interested entrepreneurs will be able to request more information starting Wednesday, August 7, through the Parallel18 website.