NASSAU, BAHAMAS – A well-known banker has stated that financial stability and cash flow remain the most dominant factors in securing financing, even with reforms that allow assets such as receivables and intellectual property to be used as collateral.
Gowon Bowe, CEO of Fidelity Bank (Bahamas), told Eyewitness News that while the Transactions in Movable Property Security Interest Bill will enable businesses to pledge assets like accounts receivables and intellectual property for loans, and give lenders confidence that their interests are secured, it may not immediately lead to expanded lending to businesses.
“The Bahamas is significantly behind the developed world in terms of the ability to register liens against assets and cash flows, starting with the absence of a land registry and a movable property registry. If you look at where we are today, even something as simple as a car loan requires a chattel mortgage to be stamped at the registry. The reality is that this reform doesn’t immediately open up capital, but it creates a way for lending institutions to register and search liens on assets more efficiently,” Bowe explained.
He continued, “What this does is bring progress, essentially bringing us into the 21st century in terms of lien registration. With this increased flexibility and efficiency, businesses now have the opportunity to monetize movable assets, like equipment or intellectual property, by quantifying the cash flows they generate and pledging these assets as collateral.”
Bowe also emphasized that while movable assets like heavy equipment might not traditionally attract loans, if businesses can demonstrate how these assets generate consistent cash flows, lenders may be more willing to consider them. “There’s been an overemphasis on real property as the only collateral. A vacant building won’t attract attention in the same way it would have 30 or 40 years ago, but a property generating cash flow on platforms like Airbnb is now more attractive because of those consistent earnings,” he said.
However, Bowe acknowledged that the new reforms would not immediately lead to widespread business lending. “The candid answer is no, it won’t immediately expand lending to businesses. But what it will do is open up opportunities for businesses to pledge movable property as collateral to banks or even financing ventures. This will allow them to raise capital through bonds or small market initiatives, where lenders have more security than just the business’s word,” Bowe noted.
Despite these opportunities, he stressed that a borrower’s ability to repay remains the critical factor. “Collateral is only valuable if you default. It’s about demonstrating cash flows to show that you can repay the loan. Collateral comes into play if you can’t,” Bowe said, adding that greater efficiency in collateral registration does open up new opportunities for businesses.
According to Bowe financial stability and cash flow will continue to be the dominant factors in financing decisions. “That’s the most prevalent factor. That hasn’t changed,” he said.
Prime Minister Philip Davis, speaking on Wednesday, emphasized the potential of the Movable Property Security Interests Bill, 2024 in empowering small and medium-sized businesses by recognizing the value of assets beyond real estate. The new legislation, he explained, opens up opportunities for businesses to use machinery, inventory, equipment, and intellectual property to secure capital for growth and expansion.
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