Government Loans For Small Businesses – From OFWs to small businesses, many are at risk of losing their livelihood due to the pandemic. That’s why the government has extended various loan opportunities to help the Philippines get back on track. One such program is CARES of the same name under the Department of Trade and Industry (DTI) and the Small Business Corporation (SB Corp), which aims to help MSMEs, OFWs, hospitals and others affected by the pandemic on them.
As of December 31, 20211, the number of loans approved under the Bayanihan Care program to 39,242 MSMEs was PHP 6.59B. The program has been extended PHP 48.4M in loans to unemployed OFWs under the CARES HEROES program to start their own business.
Government Loans For Small Businesses
If you are struggling amidst the pandemic, this guide is for you. Read on to find out the different loan options you can avail according to your situation.
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In the case of private institutions, up to 10 years including a grace period of 3 years. For permanent working capital, up to 5 years including a grace period of 1 year.
As the name suggests, the government provides a loan to help certain areas of the Philippines. Government loan programs are not always available and can vary according to the country’s needs. Recently, several loan programs have been targeted to help people cope with the pandemic and its effects on the economy.
By their very nature, most government loans are interest and collateral free. But they still charge a service fee.
Unlike government loans, the primary purpose of private institutions is to protect and grow their capital. That is why there are strict requirements for their loans and high interest rates. However, loans from private institutions, such as banks and private lenders, are always available and vary widely.
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So, if there is currently no government loan program that meets your needs, you should look into getting loans from these private institutions.
List of Philippine government loans for micro, small and medium enterprises (SMEs)1. Bayanihan Cares 2 Program with DTI and SB Corp (resuming COVID-19 support for enterprises)
B. Overview: Bayanihan CARES was first launched in May 2020 and is an interest-free and collateral-free loan program aimed at the recovery of MSMEs affected by the pandemic. The loan is subject to a one-time service fee.
Update: With the need to expand the original CARES program, the CARES 2 program was introduced in October 20202 to also serve medium-sized businesses. Through the Bayanihan Act 2, SB Corp to continue the CARES program. PHP 10 billion was allocated.
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C. Loan Amount: PHP 10, 000.00 to PHP 5 million depending on the size of the property, the annual sales of the business, as well as the submission of BIR-filed financial statements.
D. Grace Period: Up to 6 months for regular business and up to 12 months for certain industries (this is the period when you don’t have to pay anything towards the loan).
Yes. Repayment Terms: 4% to 8% service fee depending on the loan tenure and the amount borrowed.
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.
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☑ Proof of a valid micro, small or medium-sized enterprise (eg local government permit) passed at least one year prior to March 2020
Any. Best for: Existing micro businesses with assets of PHP 3 million or less and 9 and less employees.
B. Overview: The P3 program aims to help Filipino micro-entrepreneurs, which comprise the majority of MSMEs, through easy, accessible and affordable loans. The program aims to provide an alternative financing option for non-economic informal lending practices, commonly known as 5-6 lending.
C. Loan Amount: PHP 5, 000.00 to PHP 200, 000.00, depending on the size of the business and repayment capacity.
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Me. Loan Term: Maximum 18 months for loans under PHP 50,000 and maximum 30 months for loans above PHP 50,000.
Yes. Application Process: The applicant can visit the DTI Negosyo Center, DTI local office, or any recognized microfinance institution to apply for the P3 program.
3. Cares for Travel (Cares for Tourism Rehabilitation and Vitalization of Enterprises and Livelihood) by DTI and SB Corp
B. OVERVIEW: CARES for TRAVEL is part of the Bayanihan CARES program aimed at the recovery of the tourism industry. SB Corp in partnership with DoT will provide zero interest, no collateral loans to tourism MSMEs.
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F. Repayment Terms: 4% to 8% service fee depending on loan tenure and amount borrowed
Any. Best for: OFWs who lost their jobs and come back to the Philippines due to the COVID-19 pandemic.
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 help these OFWs by providing loans to help them start businesses.
H. Application Process: Applicants will be required to complete a three-day free online training with PTTC by registering at this link. After completing the training, the applicant must prepare the requirements listed below and then submit them to the BRS website.
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Any. Best for: SMEs affected by the COVID-19 pandemic who need bank loans for their working capital.
B. Overview: The Fil Guarantee, in partnership with the banking sector, acts as a general guarantee for loans provided to SMEs, meaning that they can cover part of the lender’s losses if the borrower defaults. Through this, PhilGuarantee can help MSMEs get bank loans that they otherwise would not have received.
C. Loan Amount: Maximum PHP 50 million per borrower. Loans above PHP 50 million may be taken on a case-by-case basis.
Me. Application Process: Ask a Fill Guarantee partner bank for their specific application process and requirements for the MGCP.
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B. Overview: RESPOND is a rehabilitation program that provides financial assistance to both private and public institutions affected by disasters. The purpose of the program is to speed up their recovery through a simple loan application process.
D. Loan Tenure: In case of private institutions, up to 10 years including a grace period of 3 years. For permanent working capital, up to 5 years including a grace period of 1 year.
Me. Interest Rate: Based on the benchmark rate applicable at the time of drawdown and the applicable credit scope.
F. Collateral: For Non-LGU borrowers: Real Estate Mortgage (REM) or Chattel Mortgage (CHM) or amortization as per DBP valuation withholding deposit equal to one fourth of other acceptable collateral.
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Yes. Repayment Terms: Term loans are repayable on a monthly or quarterly basis according to the cash flow of your business or project.
☑ Public or private institutions operating in areas where a competent authority has declared a state of disaster (such as those affected by Typhoon Odet)
☑ DBP form: Authorization to make inquiries and provide credit information to or from credit bureaus and banks and other creditors
B. Overview: ACPC’s SURE COVID-19 program, an extension of the original SURE4 program, provides working capital loans to micro and small agro-fisheries. Sure is an interest-free loan program available to sole proprietors, cooperatives, partnerships and corporations.
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8. I-Rescue (Interim Recovery Assistance for Enterprises Adversely Impacted by COVID-19) by the Land Bank of the Philippines
Update: I-RESCUE applications for 2021 will close on December 31, 20215. Please inquire with the Land Bank regarding 2022 applications.
Any. OVERVIEW: As part of efforts under the Declaration to Heal as One Act, the Land Bank offers financing and loan restructuring under more flexible terms under the I-RESCUE program. The program is open to SMEs, cooperatives and microfinance institutions.
C. Loan Tenure: Up to 5 years with a maximum grace period of 2 years on principal repayment depending on the borrower’s cash flow.
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D. Interest rate: 5% per year for 3 years. After 3 years, the loan is subject to annual revaluation at an interest rate of not less than 5%.
Before you apply for a government loan, you should review your business needs so that you can choose the best government loan that suits your current situation. It is important that you know the following:
By listing your needs, you will be able to create a solid plan (and backup plan) for how you can get the money you need back to pay off the loan.
Remember, businesses wishing to apply for government loans will be carefully reviewed. For example, CARE 2 and HEROES require a video presentation where you have to present your plans for the loan. 2. Do your research and choose the government loan that suits your needs
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Not all government loans are available to everyone. For example, the Bayanihan CARES 2 program prioritizes SMEs affected by the pandemic, while the HEROES program is only available to OFWs. So, you need to make sure that you do your research and prepare accordingly.
When choosing a government loan, ensure that the loan amount, loan tenure, interest rate and other relevant details match your plan.3. Prepare the necessary documents for a government loan application
There are different pre-qualification criteria for each government loan
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