The Bermuda Economic Development Corporation used just a third of its guarantee capacity to support businesses last year.

The Bermuda Government has announced plans to double the corporation’s $1 million of capital — used to guarantee loans for small businesses — but the amount of capital used for loans has fallen steadily.

Senator Crystal Caesar, the Junior Minister of Economic Development and Tourism, blamed the falling use of the guarantee capacity on banks making loans harder to secure.

However, she said increasing capital could allow the BEDC to potentially offer larger guarantees, enabling it to support loans that it otherwise would not.

Ms Caesar wrote in a response to questions in Senate: “Due to the challenged economy, banks have become more risk adverse, requiring significantly more collateral to gain loan approvals than in the past.

“As a result, the ability for the BEDC to provide guarantee approval has been impacted.

“Although it is improving since the island’s recession, banks are still slow to lend to local small and medium-sized businesses if bank loans are not 100 per cent collateralised.” Ms Caesar added that even though not all of the loan capacity is being used, making the pot bigger would give the BEDC other ways to support businesses.

She said: “Increasing BEDC’s capitalisation does allow it to provide more loan guarantees, but it also allows it to provide other direct lending or supported products.

“It also allows it to consider increasing its guarantee percentage, allowing it to be closer to what its international counterparts offer their small and medium-sized businesses.”

While the BEDC can guarantee up to 50 per cent of a loan, comparable bodies in Barbados and Jamaica can guarantee up to 80 per cent of a loan. Even more can be guaranteed by bodies in the US, Canada and the Bahamas.

Senate heard the BEDC used 71 per cent of its $6 million loan capacity in financial year 2011-12 and offered loan guarantees for 67 businesses.

But the BEDC used only 34 per cent of its loan capacity in 2016-17 — less than half of what it had five years earlier. Loan guarantees for 32 businesses were provided last year and cash was used to give micro loans to 13 businesses and to give one client an HM Customs letter of credit.

Ms Caesar also confirmed that no new loan guarantee applications have been approved since the General Election as a new board had not been appointed.

But she said new board members would be announced this month which will enable a new board to meet.

Ms Caesar added that a total of four loan guarantee applications made since July are being processed.

The BEDC has $1 million in capital, which gives it capacity for a maximum of $6 million in loan guarantees at any one time.

Government has said it will double that figure next year — giving the corporation enough capital to provide $12 million in loan guarantees.