START-UP companies have difficulties accessing financing as the intellectual property-based organizations do not meet the asset and business timeframe requirements.
Taxumo Chief Executive Officer EJ Arboleda said in a BusinessWorld online forum on Wednesday that banks do not assign value to intellectual property, the usual asset of start-ups.
“If you wanna get a loan, a lot of them would still require it’s collateralized. And if you’re a tech start-up, you don’t necessarily have assets. Your asset is IP — intellectual property — and banks are not able to put a value on IP unless you sell it to someone who wants to acquire you,” he said.
Mr. Arboleda said many small businesses are young, but banks require companies to have been running for at least three years before they are able to get financing.
In the discussion on the “crisis-proofing” of the labor force and small businesses through the pandemic, he said much of the workers go through small businesses before moving on to bigger firms.
“I think it’s important that we make sure that the small business, the new business, the start-up industry is well taken care of,” he said.
As of 2018, MSMEs (micro, small, and medium-sized enterprises) accounted for 99.5% of total businesses in the country, employing 5.7 million people or more than 60% of total employment.
Mr. Arboleda said that the country must also improve on educating its workforce for a digital economy.
“I would really love for the Philippines to really embrace being a service-based economy…but we do need to make sure that people are prepared for that type of environment,” he said.
Cobena Business Analytics and Strategy, Inc. President and Chief Executive Officer Francis Del Val said generational and geographic problems hinder the shift of MSMEs to digital.
“Those businesses that are owned by the Gen X… they’re just starting to learn about these things, so they don’t necessarily know what it is to be digital,” he said.
He also said digital is not as critical in areas located outside urban centers, especially without strong Internet connectivity.
Philippine Chamber of Commerce and Industry Assistant Vice President for Mindanao Ghaye Alegrio said that she does not foresee small businesses bouncing back in the next two years as the economy shifts to the “new normal.”
But she sees a silver lining for the manufacturing sector producing healthcare products. She urged manufacturers to hire from their local communities. — Jenina P. Ibañez