BBEDC offers fishing-permit loan program

KYLE VON BOSE

April 25, 2008 at 10:34AM AKST

Bristol Bay residents who applied for fishing permit loans through the Alaska Commercial Fishing and Agriculture Bank but were denied may have a second chance to get started in commercial fishing.

The Bristol Bay Economic Development Corp. will begin to accept applications on April 28 for a new fishing permit loan program. The program’s aim is to help applicants with fixable flaws, such as lack of funds for down payments or a lack of substantial credit history, obtain a fishing permit.

The program is the culmination of effort between the corporation and the Bristol Bay Native Association to get fishing permits back into the hands of Bristol Bay residents, which in turn should boost local economies across the region.

The commercial bank and the state Division of Investments are the only two organizations in the state that can loan money using the permit as the collateral for the loan.

The corporation is not purchasing the loans but rather providing loan guarantees to the bank for applicants who meet and comply with BBEDC’s permit program.

The program offers the permit holder a lower down payment of 5 percent, extends the loan period from 12 to 15 years, offers annual interest payment subsidies and a sweat equity agreement, which reduces loan principle by 30 percent for the next seven years. After seven years they still receive the interest subsidy but will be required to make the rest of the payment on their own.

Sweat equity is equity that is paid through time or effort. In this case, the effort and time amount to complying with the corporation’s loan assistance terms.

What this means for a potential qualifier is expert advice on getting started in the fishing industry and a reduction in annual payments of more than 50 percent for the first seven years.

To qualify, the applicant must be a resident of Bristol Bay, 18 years old and have worked with the type of fishery for which they applied for a loan for three years.

The residency requirement ensures that the economic impact of the permit reach local communities. The three-year experience requirement ensures that the people who obtain the permit aren’t getting into a career they don’t comprehend or enjoy. Complying with the corporation for counseling and management training ensures the permit is managed correctly.

Disqualifying factors are things like bad credit or overdue child support or IRS payments.

Once accepted, applicants must remain a resident of Bristol Bay, participate in the fishery for which they own the permit and comply with the corporation’s business counseling and management training for at least seven years.

The penalty for noncompliance is that the loan will default back to normal with no subsidized help from the corporation.

"Say they moved or refused training, then they would default back to the full payments and would not be considered a BBDC loan participant," said Alice Ruby, the corporation’s economic development and brokerage coordinator.

Ruby said the reason permit subsidies are needed now is because permit prices have grown beyond what the younger generation of Bristol Bay residents can afford.

A driftnet permit today can be purchased for around $90,000. Prices have steadily increased since 2002, when fishermen could purchase one for around $20,000.

"In recent years, the permits are coming back up in value," Ruby said. "The problem is that because of the economic conditions in the region, it’s difficult for some residents to get access to the capital that is needed for those permits."

Ruby said that in many villages, fishing is the only income-generating activity, so getting the permits back to the people in these villages is important. The corporation’s permit program should combat permits leaving the region.

Since this is the first year the corporation is offering the program, it will be considered a trial run.

"The board has only opened the door a little ways, because we are exploring how all of these pieces will work," Ruby said. "For right now we are really just addressing those who have been denied a loan through CFAB, but have the potential to fit in our program."

Ruby said the overall purpose of the subsidies is to boost local economies and to help get the permits back in the hands of Bristol Bay residents.

Kyle von Bose can be reached at (907) 348-2438 or toll free at (800) 770-9830, ext. 438.