Commercial Banks - Services
There are six commercial banks on the island, which makes for a competitive environment. As a result, all of the banks offer similar financing options to businesses needing short-term funds for operational purposes or longer term capital needed to buy equipment or other fixed assets.
Here are some typical credit solutions offered by banks:
Overdraft: This is a safety net that allows businesses to overdraw on their current account to an agreed limit and pay an agreed rate of interest on the overdrawn amount. It is commonly used by businesses to fund fluctuating working capital requirements and to meet short term funding needs. There is currently no limit to the amount of overdraft that can be provided by a bank. This depends on the client's needs and ability to repay. Overdrafts generally are reviewed annually, and once the overdraft is of a significant amount, the bank will also take security on the overdraft. Security can be in the form of cash, property, accounts receivable, etc. But the company should have some assets in Barbados. Interest rates on overdrafts again vary depending on the client. But it would not be uncommon for an overdraft to have a rate of prime + 2% -5% spread. The prime rate as at September 2009 was 8% for commercial loans. This would there give a range of between 10% - 13%. Extremely good clients may be able to negotiate a lower rate depending again on factors such as the security, the type of client and the income generated.
Term Loans: Terms loans are another option for raising financing if you are allowed to borrow locally. A term loan is usually for a defined period and can range from 3-5 years if unsecured. If the loan is secured it can go longer and in the right circumstances be for as long as 10 -15 years. Obviously a company would need to demonstrate its ability to service the loan over this period. Generally, for foreign controlled business these loans are much shorter. They attract similar interest rates as overdrafts (prime + 2-5%) but again this will depend on the client. They are generally used as a standard tool used for acquiring assets.
Commercial and residential mortgages: The banks will lend funds to help investors buy, renovate or build a new property suitable for their businesses, and also to buy a home. Usually, the banks will hold a first or second charge over the property as security.
The amount of money they are willing to lend, and the payment terms, will be influenced by the value of the property and the extent of new construction. Although each bank will have its own limits, an investor can expect a commercial mortgage to provide between 60 percent and 70 percent of the funds you need. Terms for commercial mortgages will tend to be around 10 years and more. The interest rate will vary as with overdrafts and term loans.
Offshore Banks and Merchant Banking: If however, you are unable to borrow funds locally, virtually all of the banks in Barbados r have an offshore bank that can assist foreign investors and companies to secure the financing they need.
Local merchant banking services are also available on the island for bigger transactions and they can provide corporate financing on a regional basis. Generally speaking, these services are geared to investors with projects or business expansions that require large amounts of long-term capital and who are looking for debt financing through bonds or debentures rather than traditional loans. These securities may then be purchased by local investment managers that include mutual funds and large insurance companies.
For larger projects banks in the region also make use of lending syndicates with partners within and external to the region.
Below is a list of the commercial banks with operations in Barbados. You may visit their websites for more detailed information on the financing options they offer to foreign investors.
- The Royal Bank of Canada
This is Canada's largest bank in terms of assets. RBC has been a major player in the Barbados banking industry for over 50 years. www.rbcroyalbank.com/caribbean
- The Royal Bank of Trinidad & Tobago
Headquartered in Trinidad, with operations throughout the Caribbean, RBTT became a wholly owned subsidiary of RBC in 2008.
- The Bank of Nova Scotia (Scotiabank)
Canada's second largest bank also has a long history as part of the island's banking industry. In addition, it is well established throughout the Caribbean and Latin America.
- First Caribbean International Bank
Headquartered in Barbados, with a wide regional network, FCIB was formed in 2001 when the Canadian Imperial Bank of Commerce and Barclays Bank merged their Caribbean operations. In 2006, CIBC acquired all of Barclays' shares.
- Barbados National Bank
Barbados National Bank was formed as a commercial bank in 1978 by the government of the day. In 2003, Republic Bank Limited, of Trinidad, became the majority shareholder and now owns about 65 percent.
- The Bank of Butterfield
Headquartered in Bermuda, Butterfield Bank is the newest addition to the Barbados commercial banking landscape. It has been operating on the island since 2004.
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