Loan for Small Business from Government: How to Get It

Let’s face it: a reliable source of capital is crucial to your business’ success. In the Philippines, a small business loan from the government helps a lot. Speaking of, this guide will discuss how you can get a loan for small business government. 

Despite the advantages alone for small business government offers, three out of four or about 77% of small- and medium-sized enterprises in the Philippines do not get enough capital. Around 48% of these underfunded businesses experience cash flow problems. As a result, they can’t introduce new products or services to the market.

So instead of wasting all of your savings or asking family and friends for money, getting a loan for small business government helps you avoid typical start-up issues. 

To help you make an informed decision about getting a loan for small business government, we came up with a guide that discusses everything you need to know about getting a small business loan. 

What is a Business Loan?

Any business needs money or capital to start earning profits. The Z capital of income is in a form of a loan. 

In a nutshell, a business loan refers to money received from banks, the government, and other financial institutions. Business owner use this capital to develop products and offer services.

Entrepreneurs can also use the money to pay off debts and other obligations. Whatever the intended use, business loans offer relief to entrepreneurs who need more money for their operations. 

Next, the lenders collect payments with interest from the business owners. Depending on the agreed-upon payment schedule, the business owners have to pay an amount in a certain period of time. 

Four Types of Business Loans in the Philippines

There are four main kinds of business loans available in the Philippines. 

These kinds of business loans meet various business needs. Hence, it helps to have a general understanding of the different types of business loans before you start looking for the ideal business loan. By doing this, you can more quickly identify the loan that meets your needs and weigh your opportunities. 

1. Term Loans

With the help of a term loan, business owner can finance their operations for the long or short term. They can also do this while maintaining control over their own cash flow. 

This is a small business loan fantastic for starting business owner who want to spread out their repayments over time. 

2. Credit Line

A credit line refers to finds you can instantly access. This is a small business loan also known as a short-term loan. 

Because interest only starts to accrue after you make a purchase using the credit line, this gives you more financial control. In addition, only the amount you use acquires an interest. 

Moreover, a credit line allows you to continually access funds without having to submit new applications each time. Also known as an evergreen loan, you can get funds from your credit line and make payments more than once.

3. Secured Business Loan

Small businesses loan for commercial purposes, a secured loan requires collateral. The lender can claim the collateral to recoup their losses if the borrower defaults on the loan. Collateral examples include real estate properties and vehicles. 

In addition, secured loans typically feature lower interest rates and longer loan terms. They also include bigger loan amounts than unsecured loans. 

In this case, the collateral lowers the risk for lenders. A secured business loan also suits new enterprises that require finance at a time. It also suits businesses starting to turn a profit because of these aspects that make them inexpensive.

Moreover, lenders impose a number of fees linked to collateral for secured company loans, including fees for collateral registration and evaluation.

4. Unsecured Business Loans

In contrast to secured loans, start-up enterprises in the Philippines can obtain an unsecured business loan. As the name suggests, the small businesses loan does not require collateral. 

However, this is a small business loan that is more challenging to qualify for. In particular, those with a poor credit history or no credit history will find it hard to get an unsecured business loan. 

In addition, an unsecured business loan includes higher interest rates and shorter repayment periods. It also doesn’t let you borrow big amounts. 

Private lenders in the Philippines frequently offer unsecured business loans. Unlike large banks that prioritize secured business loans, private lenders usually offer higher interest rates. 

Given this, you should only work with respectable private lenders if you need an unsecured business loan. Their processing period also usually takes faster than those of many banks.

Moreover, depending on your company’s credit profile, the rates of some reputable private lenders can compete with those of large banks. 

How to Get Loan for Small Business Government in the Philippines

Small and medium-sized enterprises significantly contribute to the economy of the Philippines. They do this by creating jobs and encouraging development in rural areas.

However, the COVID-19 pandemic had a significant negative impact on these businesses. In fact, over 73% of small and medium-sized enterprises in the Philippines stopped their operations a month after the lockdown in 2020. 

In addition, as of June 2021, approximately 10% of small and medium-sized enterprises in the Philippines remained closed. 

Due to this, the government launched programs to help small and medium-sized enterprises. These programs aim to help them recover from the economic effects of the pandemic. Since the business sector is one of the most hit sectors in the country, it helps to know how you can get a loan for small business government. 

Pondo sa Pagbabago at Pag-Asenso (P3)

The Pondo sa Pagbabago at Pag-asenso (P3) Program is a financing effort of the government. This program helps small entrepreneurs in the Philippines by giving them affordable small business loans with only 2.5% monthly interest. 

In addition, this funding program gives an alternative quick and easy source of loans for small businesses. The program boosts the micro-enterprise sector, which includes small and medium-sized enterprises in the Philippines.

The government also recently expanded this program in response to the COVID-19 pandemic. This program also helps support the operations of small businesses in the Philippines during and after the lockdowns. 

Furthermore, SB Corporation, an attached agency of the DTI, administers this program. Aside from creating a program management office that governs the funds, SB Corporation will use its lending network and DTI Negosyo centers to reach out to beneficiaries. 

Requirements:

• Application form
• Business permit
• DTI registration
• Government-issued ID
• ID picture 

Assistance to Restart Enterprises (CARES) Program for COVID-19

This particular program is another one that can lend you alone for small business government loan.

In particular, this program includes 1 billion PHP in funds allocation. Small and medium-sized enterprises can apply for small businesses loans with no interest under this program. The money aims to help them recover from the pandemic economic effects.  

Micro-enterprises having an asset size of no more than PHP 3 million may borrow PHP 10,000 to PHP 200,000 through this government loan programs for small firms. Small businesses can also obtain a greater loan amount of up to PHP 500,000 as long as their total assets do not exceed PHP 15 million.

MSME Credit Guarantee Program (MCGP)

The Philippine Guarantee Corp. is a provider of the MGCP (PhilGuarantee). It attempts to enhance the amount of credit available from the banking industry while also giving MSMEs much-needed financial support.

About 8,839 MSMEs have used the program as of February 2021, so far releasing PHP 952.5 million in loans from 10 recognized banks and financial institutions.

How to Get Loan for Small Business Corporation in the Philippines

Here’s how you can get loans for small business government loan in the Philippines. 

Please take note that this information is based on SB Corporation’s website. 

Requirements

• Fully-accomplished loan application (via online loan application)
• One (1) government-issued ID with picture
• Proof of permanent business address

Create an online account

• Use this link to enter your online profile’s basic data.
• When finished, click Create Account.

Start the application process

• After setting up your online account, you will be taken to the page for the application process. Simply complete the process by entering your personal and professional information.
• Include all necessary documentation on one page. (A list of the necessary documents is supplied on the page.)
• When finished, click Finish.

Next steps

• An SB Corp Account Officer will get in touch with you to talk about your application and, if necessary, seek more details or supporting documentation.
• All applications must adhere to the SBCorp Program’s loan credit requirements and standards.

How the Pandemic Affected Small Businesses in the Philippines

Nationally, regionally, and internationally, the novel coronavirus disease COVID-19 had a substantial impact on people’s lives and business operations. The country also moved quickly to contain the pandemic, including the use of enhanced community quarantine (ECQ).

Hence, the Philippines developed an emergency subsidy program with significant public investment. The government did this to support disrupted homes and businesses. 

The national capital region and high-risk provinces were placed under a severe lockdown from mid-March until the end of May 2020. This resulted in significant economic losses. The Philippine economy has also entered the recovery stage six months after the March lockdown. However, micro, small, and medium-sized businesses (MSMEs) are still struggling with a severe decline in demand and sales.

To help its residents during this crisis, the Philippine government passed legislation. The government gave emergency aid to people all around the Philippines. However, it wasn’t enough to support daily expenses.

Additionally, businesses hardly cope with the losses caused by the pandemic. This led to many of them closing. Those that temporarily shut down their businesses last year and restarted this year must make up for lost sales using the right business strategies. 

Nevertheless, experts are optimistic about the future of small and medium-sized businesses. 

Loan for Small Business Government: Help With Rent

Businesses operating in isolated communities now have access to special measures that can help them pay their rent.

These regulations can be availed by businesses registered with the BOI but are not run or enforced by the BOI.

A grace period for rent payments for homes and businesses also exists. This grace period lasts 30 days after the rent reaches its due or until the quarantine ends, whichever comes first.

In addition, commercial and residential rents are not due during this grace period. Hence, there won’t be any interest, fees, penalties, or other costs. Moreover, the grace period won’t be interrupted by eviction.

Help With Loan Payments 

Businesses operating within restricted zones having trouble repaying loans can also get assistance from the government. 

According to Philippine legislation, all banks, quasi-banks, financing institutions, and businesses, both public and private, must provide loan payment assistance to local businesses affected by quarantines. They must also be given a 30-day grace period before making payments on any loans.

This holds true for all types of loans, including credit card loans. It also applies to wage, personal, home, and automobile loans. Moreover, the debtor shall not be subject to any interest, charges, or payments as a result.

Frequently Asked Questions

Conclusion 

A loan for small business government can help you in many ways.  For instance, if you are starting a baking business, a loan can help you develop more products or put up more branches. 

Hopefully, this guide helped you make an informed decision about a loan for small businesses from government. Looking forward to your success!

About HICAPS

Over the years, HICAPS has helped bakers and businesses make delicious products by offering ingredients like ChiffonAide Cake Oil, Magic Whizk Whipping Cream, Red Velvet Flavor Emulco, and Instabake Brownie Mix. 

HICAPS also provides tools and resources to valued partners such as the free “How to Increase Your Sales Amidst the Pandemic” E-book and free dealer locator that helps look for baking ingredients near me. 

Want more free tips and tutorials? Follow us on Facebook at Hicaps Mktg. Corp. and on YouTube at HicapsTV. 

Want to be one of our valued partners? Fill this form out. Looking forward to talking to you soon!