Survival, Recovery, Business Continuity — these are the themes that resonate in the minds of entrepreneurs and likely keep them awake at night, especially with the impact of the pandemic on businesses. Yes, “Cash is King” — but the real question is where to source or access funds? While all businesses have not been spared from the pandemic, the most affected are the micro, small, and medium enterprises (MSMEs). They are a critical force in our economy, and comprise 99.6% of Philippine establishments, and the majority are owned and/or managed by women.
With MSMEs driving innovation and job generation, governments, central banks, and financial institutions have all responded positively and adopted flexible policies to mitigate the impact of what started as a health crisis — and has now become a socio-economic crisis.
Even before the pandemic, several Philippine government agencies launched programs that specifically address the needs of MSMEs. These programs have proven to be a good resource and response to the crisis, more so today.
SUPPORTING WOMEN ENTREPRENEURS
This crisis prompted me to revisit the Inclusive Lending Window for Aspiring Women Entrepreneurs (ILAW) Program — a partnership between the Women’s Business Council Philippines, Inc. (WomenBizPH) and the Development Bank of the Philippines (DBP), which commenced almost six years ago. As of May 2020, ILAW has extended credit facilities valued at P2.1 billion to 370 women entrepreneurs: mainly in the agriculture, wholesale and retail, and health sectors. While ILAW was conceptualized pre-COVID-19, the program may be availed of during this crisis by female business owners, as it gives priority to women and has simple lending procedures. It is a dedicated lending window that provides flexible collateral policies and customizes repayment schedules.
SUPPORTING INSTITUTIONS IN A CALAMITY
For businesses, including startups, that have been operating for only one year prior to a calamity, DBP has another program called, Rehabilitation Support Program on Severe Events (RESPONSE). This program extends rehabilitation financing support to both public and private institutions which have been severely affected by calamities and/or events arising from such calamities. Eligible businesses are provided financial support to expedite their recovery process while simultaneously assisting in the economic recovery of the calamity-stricken area. Loans of up to 95% of the funds needed may be extended with flexible terms of five years, at an interest rate of 1% over the Bloomberg Valuation Service (BVAL) rate, and fees are also waived.
In my conversations with the DBP, I was introduced to the lending programs of the Department of Agriculture (DA), which are managed by the Agricultural Credit Policy Council (ACPC). The program is called the Expanded SURE Aid & Recovery Project (SURE COVID-19) which is available to agri/fishery-based micro and small enterprises to enable them to continue operations and ensure availability of food supply during the lockdown. Up to P10 million in loans for working capital may be extended at zero interest, payable up to five years.
Another ACPC Program is the Kapital Access to Young Agripreneurs (KAYA), which provides loans for working capital or fixed assets acquisition. Eligible borrowers are graduates of formal or non-formal schooling, aged 18 to 30 years, who can borrow to finance startups or fund existing agri-based projects. Up to P500,000 in uncollateralized loans, payable over five years, at zero interest may be availed. An innovative feature of this lending program is the use of a digital platform where disbursements and collections may be transacted through cash cards using ATM terminals, and the conduct of training and mentoring modules through web conferencing, among others.
Also available is the AgriNegosyo Loan Program (ANYO), which can provide capital to micro and small agri-based enterprises for working capital, fixed assets, and construction. From P300,000 up to P15 million loans may be extended for up to five years, likewise at zero interest.
SUPPORTING MICRO AND SMALL ENTERPRISES
The Department of Trade and Industry (DTI) has launched the COVID Response to Restart Enterprises (CARES) to address the needs of micro and small enterprises. CARES is administered by SB Corporation, an attached agency of the DTI.
This program grants interest free loans from P10,000 to P50,000, depending on the asset size of micro and small enterprises. The payment period is from 18 to 30 months inclusive of a six-month grace period.
BEYOND THE PANDEMIC
There is no “one size fits all” solution to access financial support. Every entrepreneur should study and consider the options available and choose what suits their business and are realistically “doable.”
A valuable piece of advice from a banker on how to make a business “bankable”: Business owners and entrepreneurs must believe in their business and have the know-how and commitment to execute their business plan. While it may seem “easy” to borrow money and survive for the time being, what is critical is to ensure that the business will be able to repay a loan and keep the business afloat and eventually thrive.
With no end in sight to the pandemic, businesses will be facing an uncertain future. My recommendation: reevaluate your strategies, develop clear long-term solutions, seize the opportunities, and navigate the crisis. With different institutions working together to support entrepreneurs, I have no doubt that we will emerge stronger and create a more resilient business ecosystem in the Philippines.
This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.
Ma. Aurora “Boots” D. Geotina-Garcia is the President of Mageo Consulting Inc., which provides corporate finance advisory services. She is a member of the MAP Corporate Governance Committee and the Chairperson of the Philippine Women’s Economic Network (PhilWEN).