Government Loans To Small Businesses – From OFWs to small businesses, many are at risk of losing their livelihoods due to the pandemic. That is why the government has expanded many types of loans to help Filipinos get back on track. One of these programs is Bayanihan CARES, 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 epidemic.
As of December 31, 20211, the amount of loans sanctioned under the Peduli Bayanihan Program was PHP 6.59B to 39,242 MSMEs. The program also provides PHP 48.4M in loans to unemployed OFWs to start their own businesses under the CARES Heroes program.
Government Loans To Small Businesses
If you are struggling due to the pandemic, this guide is for you. Read on to find out about the different loan options available to you based on your situation.
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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.
As the name suggests, government loans are issued by the government to help certain sectors in the Philippines. Government loan programs are not always available and may change depending on the country’s needs. Recently, many loan programs have been launched to help people cope with the pandemic and its impact on the economy.
By their very nature, most government loans are interest-free and unsecured. But they still charge a service fee.
Unlike public debt, the primary purpose of private institutions is to protect and grow capital. Because of this, they have strict loan requirements and high interest rates. However, loans from private institutions, such as banks and private lenders, are always available and have more variety.
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So, if there is currently no government loan program that meets your needs, then you should look for a loan from this private institution.
List of Philippine Government Loans for Micro, Small and Medium Enterprises (UMKM)1. Bayanihan Cares 2 Program (Covid-19 Enterprise Reboot Support) by DTI and SB Corporation
B. Summary: Initially launched in May 2020, Bayanihan CARES is an interest-free and collateral-based loan program designed to rehabilitate UMKM affected by the pandemic. Loans are subject to a one-time service fee only.
Update: The CARES 2 program was introduced in October 2020 to accommodate medium-sized businesses, with the need to expand the original CARES program. Through the Bayanihan Act 2, the PHP 10 billion SB Corp. Who is assigned to the Continuity of Cares program?
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C. Loan amount: PHP 10,000.00 to PHP 5 million depending on the size of the assets, annual sales of the business, as well as the submission of financial statements filed with the BIR.
D Grace period: up to 6 months for regular business and up to 12 months for certain industries (this is the period when you do not have to pay anything for the loan).
G Payment Terms: The service fee ranges from 4% to 8% depending on the tenor of the loan and the amount borrowed.
H. Application Process: All applications must be made online through the SB Corp Borrower Registration System or the BRS website. Through the website, you have to upload all the documents required for the loan. After completing the application, you must wait for an email from SB Corp for the next step.
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☑ Evidence of a valid micro, small or medium-sized enterprise (e.g. local government permit) for at least one year before March 2020
Best for: Existing micro businesses with assets of PHP 3 million or less and 9 or less employees.
B. Brief Description: The P3 Program aims to help small entrepreneurs in the Philippines, which comprise the majority of MSMEs, through easy, accessible and affordable loans. The program aims to provide an alternative financing option for informal usurious credit practices, commonly known as 5-6 loans.
C. Loan Amount: PHP 5,000.00 to PHP 200,000.00, depending on business size and ability to pay.
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E Loans: 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, a DTI local office, or an accredited microfinance institution to apply for the P3 program.
3. Care of Tourism Rehabilitation and Revitalization of Business and Livelihood by DTI and SB Corporation
B. Brief Description: Care for Travel is part of the Bayanihan Care program that focuses on 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 Payment Terms: The service fee ranges from 4% to 8% depending on the tenor of the loan and the amount borrowed.
Best for: OFWs who lost their jobs and returned to the Philippines due to the COVID-19 pandemic.
B. Summary: 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 must undergo a three-day free online training with PTTC by registering at this link. After completing the training, applicants must prepare the following requirements and submit them to the BRS website.
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Best for: SMEs affected by the COVID-19 pandemic that need a bank loan for working capital purposes.
B. Brief Description: Phil Guarantee, in partnership with the banking sector, acts as a general guarantee for loans to UMKM, which means that they can cover some of the lender’s losses in case of defaulting borrowers. Through this, Fill Guarantee can help UMKM to gain access to bank loans that they may not otherwise have access to.
C. Loan Amount: Maximum Php 50 million per borrower. Loans above PHP 50 million may be accepted on a case-by-case basis.
I Application Process: Ask the partner bank to ensure the content for the specific application process and requirements for MGCP.
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B. Brief Description: RESPONSE is a rehabilitation program that provides financial assistance to private and public institutions affected by disasters. The program aims to speed up recovery through a simple loan application process.
D Loans: 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.
E Interest Rate: Based on the applicable benchmark rate at the time of withdrawal and credit spread.
F Collateral: For non-LGU borrowers: Real estate mortgage (REM) or chattel mortgage (CHM) or a deposit equal to one-fourth of the repayment according to the value of the DBP or other acceptable security.
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G Payment Terms: Term loans must be paid monthly or quarterly according to the cash flow of your business or project.
☑ Areas where public or private institutions operate have been declared in a state of disaster by the competent authorities (such as those affected by Typhoon Odet).
☑ DBP form: Authorization to make inquiries and provide credit information from credit bureaus and banks and other creditors
B. Brief Description: The SURE COVID-19 program by ACPC, an extension of the original SURE program4, provides working capital loans to small and micro agro-fishery enterprises. SURE is an interest-free loan program available to sole proprietorships, cooperatives, partnerships and corporations.
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8. I-Rescue by Land Bank of the Philippines (Interim Rehabilitation Assistance for Cushion Companies Affected by Covid-19)
UPDATE: The I-RESCUE application for 2021 closes on December 31, 20215. Please ask the Land Bank about the 2022 application
A Brief Description: As part of Bayanihan’s efforts to heal as a wrongdoing, Land Bank provides financing and debt restructuring under more flexible conditions in the i-Rescue program. The program is open to SMEs, cooperatives and microfinance institutions.
C. Loan Tenor: Up to 5 years with a maximum grace period of 2 years for 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 repricing at an interest rate of not less than 5%.
Before applying for a government loan, you need to check your business needs so that you can choose the government loan that best suits your current situation. It is important that you know the following:
By listing your needs, you’ll be able to make a better plan (and backup plan) for how to get the money you need to pay off your debt.
Remember, businesses looking to apply for a government loan will be scrutinized. For example, CARE 2 and HEROES require a video presentation where you present your plan for the loan. 2. Do your research and choose a government loan that suits your needs
How To Get Loans For A Small Business In The Philippines
Not all government loans are available to everyone. For example, the Bayanihan CARES 2 program prioritizes MSMEs affected by the epidemic, while the HEROES program is only for OFWs. So, you need to do your research and prepare.
When choosing a government loan, make sure that the loan amount, loan tenure, interest rate and other relevant details match your plan. Prepare the necessary documents for the government loan application
Every government loan has different prequalification criteria
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