Government Lending To Small Businesses

Government Lending To Small Businesses – The economic downturn caused by the pandemic has taken a painful toll on small businesses. Since the Great Lockdown in the spring of 2020, many retail businesses have permanently closed in cities around the world.

Small and medium enterprises have a major impact on the local economy. They account for about half to two-thirds of private sector employment in the United States and the European Union, respectively, and contribute about 40 percent of national income in emerging economies.

Government Lending To Small Businesses

But smaller firms face more difficulties in obtaining financing than larger firms, especially during times of financial crisis. Hence the government has taken several measures to help small businesses cope with the pandemic. Without such support, the failure rate for small businesses could increase by as much as 9 percentage points.

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Our weekly chart, based on the Financial Access COVID-19 Policy Tracker, reveals the most common government support measures used by 130 countries to help cash-strapped small businesses. The data showed that overall, financial assistance such as grants was the most commonly used policy measure (adopted by 77 percent of countries), followed by public guarantees on loans (50 percent), debt deferrals (30 percent), tax There were concessions (28 per cent). , and a low interest rate (24 percent).

However, the pattern of these policy responses varies across different income groups. Many high- and middle-income countries adopted multiple measures, with averages of 2.5 and 1.9, respectively. About 80 percent of these economies implemented financial aid, while the contribution of other measures remained low, between 20 and 60 percent. For example, Bolivia, Botswana and India are among several middle-income countries that have adopted both financial assistance and credit guarantees.

On the other hand, no low-income country in the Policy Tracker adopted more than two measures. Financial assistance and tax relief were the most commonly used measures, adopted by 75 percent and 33 percent of low-income countries, respectively, including Mali, Rwanda and Uganda.

As the (pandemic) spreads across the globe, as countries prepare for recovery, it will be important to monitor policy measures to support people and small businesses affected by the pandemic. Policy Tracker can help policy makers identify effective policies, share experiences and learn from each other. From OFWs to small businesses, many are at risk of losing their livelihood due to the pandemic. That’s why the government has extended a variety of loan opportunities to help Filipinos get back on track. One such program under the Department of Trade and Industry (DTI) and Small Business Corporation (SB Corporation) is Benihan Care, which aims to help MSMEs, OFWs, hospitals and others affected by the pandemic.

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As on December 31, 20211, the number of loans sanctioned to 39,242 MSMEs under the Bayanihan Care program stood at PHP 6.59B. The program extended PHP 48.4M in loans to unemployed OFWs to start their own business under the CARES Heroes program.

If you are battling a pandemic, then this guide is for you. Read on to know the different loan options you can avail depending on your situation.

Relaxation up to 10 years for private institutions with a relaxation of 3 years. For permanent working capital, up to 5 years with a grace period of 1 year.

As its name suggests, government debt is given by the government to aid certain areas of the Philippines. Government loan programs are not always available and may vary depending on the needs of the country. Recently, several loan programs have been targeted to help people recover from the pandemic and its effects on the economy.

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By their nature, most government loans are interest and collateral free. But still they charge service charge.

Unlike government debt, the primary objective of private institutions is to protect and grow their capital. This is the reason why they have strict loan requirements and high interest rates. However, loans from private institutions such as banks and private lenders are always available and there is a wide variety.

Therefore, if there is currently no government loan program that meets your needs, you should consider obtaining loans from these private institutions.

List of Philippine Government Loans for Micro, Small and Medium Enterprises (MSMEs) 1. Binihan Cares 2 Program (COVID-19 Support for Restarting Enterprises) by DTI and SB Corp

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B Overview: Originally launched in May 2020, Bayanihan CARES is an interest and collateral free loan program geared towards the recovery of MSMEs affected by the pandemic. The loan is subject to a one time service charge only.

Update: Due to the need to expand the original CARES program, the CARES 2 program was introduced in October 2020 to accommodate medium-sized businesses as well. Through the Baynihan 2 Act, PHP 10 billion was allocated to SB Corporation to continue the CARE program.

C Loan Amount: PHP 10, 000.00 to PHP 5 million depending on the size of the property, annual sales of the business, as well as the submission of BIR-file financial statements.

D Grace Period: Up to 6 months for regular business and up to 12 months for certain industries (this is the period where you do not have to pay anything towards the loan).

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G. Repayment Terms: 4% to 8% service charge depending on the loan tenure and loan amount.

H Application Process: All applications must be made online through SB Corp’s Borrower Registration System or the BRS website. Through the website, you will have to upload all the documents required for the loan. After completing the application, you will need to wait for an email from SB Corp for the next steps.

☑ Proof of operation of a micro, small or medium-sized business (eg local government permit) valid for at least one year from March 2020

A Best: Existing micro businesses with assets of PHP 3 million or less and 9 and fewer employees.

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B Overview: The P3 program aims to assist Filipino micro-entrepreneurs, which largely include MSMEs, through easy, accessible and affordable loans. The objective of this program is to provide an alternative financing option to atypical informal lending practices, commonly known as 5-6 loans.

C Loan amount: PHP 5, 000.00 to PHP 200, 000.00, depending on business size and repayment capacity.

E Loan Term: Maximum 18 months for loans below PHP 50,000 and maximum 30 months for loans above PHP 50,000.

G Application Process: Applicants can visit a DTI Negosyo Center, DTI local office or an accredited microfinancing institution to apply for the P3 program.

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3. Tourism Care (Tourism Rehabilitation and Revitalization of Activities and Livelihoods) by DTI and SB Corporation

B Overview: Travel Care is part of the Binihan Care program focused on the restoration of the tourism industry. SB Corp, in partnership with DoT, will provide zero interest, no collateral loans to tourism MSMEs.

Repayment Terms: 4% to 8% service charge depending on loan tenure and loan amount

Best for: OFWs who have lost their jobs and returned to the Philippines due to the COVID-19 pandemic.

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B Overview: Due to the impact of the global pandemic, more than 300,000 OFWs have been repatriated and are currently unemployed. The HEROES program aims to assist these OFWs by providing loans to help them start businesses.

H Application Process: Applicants will be required to undergo three days free online training with PTTC by registering at this link. After completing the training, the applicant should prepare the requirements listed below and then submit them on the BRS website.

Best for: MSMEs affected by the COVID-19 pandemic who require bank loans for their working capital purposes.

B Overview: The Phil Guarantee, in partnership with the banking sector, acts as a general guarantee for loans provided to MSMEs, which means they can cover some of the borrower’s losses if the borrower defaults Are. Through this, Phil Guarantee can help MSMEs to get bank credit, which they otherwise would not have had access to.

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C Loan amount: Maximum of PHP 50 million per borrower. Loans above PHP 50 million may be accepted on a case-to-case basis.

I Application Process: Ask the Fill Guarantee partner bank for their specific application process and requirements for MGCP.

B OVERVIEW: RESPONS is a rehabilitation program that provides financial assistance to private and public organizations affected by disasters. The objective of the program is to speed up their recovery through a simple loan application process.

D Loan tenure: For private institutions, up to 10 years with a grace period of 3 years. For permanent working capital, up to 5 years with a grace period of 1 year.

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E Interest Rate: Based on the benchmark rate applicable at the time of drawdown and applicable credit spread.

F Collateral: For Non-LGU borrowers: Real Estate Mortgage (REM) or Chattel Mortgage (CHM) or Hold-out on one-fourth amortization as per DBP valuation or equivalent deposit of other acceptable collateral.

Repayment terms: Term loans are repayable on monthly or quarterly basis depending on the cash flow of your business or project.

☑ Public or private organizations operating in areas declared under a state of disaster by the competent authority (such as those affected by Typhoon Odette)

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☑ DBP Form: Authorization to inquire and provide credit information to credit bureaus and other banks

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