Photo courtesy of Landbank of the Philippines
MSMEs play an important role in the country’s economy, providing jobs and encouraging development in rural communities. However, the COVID-19 outbreak affected them heavily as over 73% of MSMEs stopped their business one month after the ECQ last year. Around 10% are still closed as of June 2021.
As one of the most affected sectors, the government started a lending initiative to help MSMEs recover from the economic impact of the pandemic. Here’s everything you need to know about the MSME loans in the Philippines:
Pondo sa Pagbabago at Pag-Asenso (P3)
This MSME loan program from the Small Business Corporation (SB Corp) aims to provide an alternative financial line to MSMEs that borrow from informal lenders (5-6 money lenders).
Micro enterprises with an asset size not exceeding P3.0 million can borrow Php5,000 up to Php200,000 with a 2.5% interest rate per month.
How to Apply
Pondo Sa Pagbabago At Pag-Asenso (P3)
SB Corp is also partnering with financial institutions to make the loan program more accessible to MSMEs. Borrowers can visit microfinancing institutions (MFIs), cooperatives, and rural banks that are SB Corp partner lenders. You can view the list of P3 Partners here!
Expanded P3 Programs For COVID-19
In response to the pandemic, the government expanded the P3 Program and provided COVID-19 loans for MSMEs to help them sustain their businesses during the pandemic.
COVID-19 Assistance to Restart Enterprises (CARES) Program
The CARES Program is a Php1 billion Enterprise Rehabilitation Financing (ERF) loan facility under the P3 Program. MSMEs can avail of interest-free loans to help them recover from the economic impact of the pandemic.
This small business government loan program allows micro-enterprises with an asset size of not more than Php3 million to borrow Php10,000 up to Php200,000. Meanwhile, small enterprises with an asset size of not more than Php15 million can borrow a higher loan amount up to Php500,000.
On August 17, 2020, SB Corp reopened its second batch of online applications under Bayanihan Act 2 naming it as CARES 2. It requires all MSE applicants to apply online and will no longer accept manual applications.
CARES 2 Program Features
- Loan Limit: Microenterprises may borrow from P10,000 up to P200,000 and Small enterprises may borrow up to P500,000.
- Zero Interest Rate
- Grace Period: Maximum of 6 months. After 6 months loan amortization will start.
- Loan Amortization after Grace Period: Maximum of 12 months for loans not more than P50,000 and maximum of 24 months for loans more than P50,000.
- Service Fee: 6% if the loan does not exceed 18 months and 8% if the loan term exceeds 18 months.
How to Apply
COVID-19 Assistance to Restart Enterprises (CARES) Program
SB Corp reopened its second batch of online applications on August 17, 2020, naming it as CARES 2. It requires all MSE applicants to apply online and will no longer accept manual applications. You can send your application here!
Helping the Economy Recover through OFW Enterprise Startups (HEROES) Program
The HEROES program is also a part of the P3 program, providing a Php100 million loan facility to repatriated OFWs. It provides them with an opportunity to start their own business as an alternate source of income.
By availing this loan for Philippine MSMEs, applicants may borrow Php10,000 to Php100,000 that’s free of interest and collateral. However, a 6% service fee will be charged to loans with 24 months payment terms while there’s an 8% fee for loans with 36 months payment terms (inclusive of 12 months grace period.)
How to Apply
Helping the Economy Recover through OFW Enterprise Startups (HEROES) Program
Applicants must first register for the Philippine Trade Training Center’s online training for start-ups (access the form here.) Qualified applicants will receive instructions on how to apply for the MSME loan from the government after the training.
MSME Credit Guarantee Program (MCGP)
The MGCP is a guarantee offered by the Philippine Guarantee Corp. (PhilGuarantee). It aims to increase the availability of credit from the banking sector while also providing much-needed financial support to MSMEs.
As of February 2021, a total of 8,839 MSMEs have availed the program – releasing Php952.5 million in loans from 10 accredited banks and financial institutions.
MCGP Features
- Eligible Borrowers: MSMEs affected by the covid-19 pandemic.
- Loan Amount: Maximum of Php 50 million per borrower. Loans of over Php 50 million are subject to PHILGUARANTEE’s regular credit guarantee program guidelines before they can be accepted.
- Guarantee Limit: 50% coverage for working capital loans, and up to 80% for terms loans for capital expenditures.
- Fees: 1% guarantee fee per year and Php 5,000 amendment fee.
How to Apply for MCGP Program
Interested borrowers must file an application and submit all the needed requirements to the accredited lending partners. After this, PhilGuarantee will advise the approval of the guarantee coverage to the accredited bank or financial institution.
PhilGuarantee has extended the validity of MCGP until September 2021. If you have any questions or inquiries about the program, you can reach them here.
Through the MSME loans, the MSME sector can continue to support and improve their livelihood in the Philippines.
You can also check out agricultural loans for farmers, fishermen, and agribusinesses here!