Retail Lending for SMEs: What You Need to Know
Who qualifies to borrow under SULONG?
- Enterprises in all industries except trading of imported goods, liquor, cigarettes and extractive industries.
- Enterprises that are at least 60% Filipino owned, whose assets are valued at not more than P 100.00 M, excluding the value of the land, or subject to ownership rules as defined under existing Philippine laws for specific industries.
What type of loans may be funded?
- For short-term loans, the entrepreneur may tap the program either for export financing (export packing credit) or a credit line for temporary working capital.
- For long term loans, SMEs may apply for loans for permanent working capital, or to purchase equipment, a lot or to construct a building/warehouse.
What is the maximum financing?
- For short-term loans, the program can fund up to 70% of the value of the LC/PO (export packing), or 70% of working capital requirement (temporary working capital); maximum of P 5.0 M.
- For long-term loans, 80% of the incremental project cost, maximum of P5.0M.
What is the repayment term?
- For short-term loans, a maximum of one year.
- For long-term loan, a maximum of five years, inclusive of a maximum one year grace period on principal monthly amortization.
Are collaterals required? If so, what assets are acceptable?
The program will not decline a loan only on the basis of inadequate collateral. However, the borrower must be willing to mortgage any available business and personal collateral, including assets to be acquired from the loan, to secure the borrowing.
The following are acceptable collaterals: postdated checks, registered/unregistered REM/ CHM, or the assignment of life insurance. In addition, for franchisees, the following may be considered: corporate guarantee and assignment of lease rights.
If the loan purpose is for export packing credit, a borrower may assign his LC/PO or sales invoice.
What financial ratios/hurdles must a borrower meet?
The debt-equity ratio must at most be 80:20 after the loan. For franchisees, the required ratio is 70:30.
In addition, the borrower must show positive income for the preceding year. Should the SME borrower's financials show negative income in the past year, the GFI may consider their average income for the last two or three years.
What is the interest rate for loans under this program?
The participating GFIs will charge the same rate for the program based on a regular review. In its program launch, the interest rate for loan releases until June 30, 2003 shall be: 9% for short-term loans; 11.25% for medium-term loans of up to 3-years and 12.75% for loans over 3-years to five years.
Aside from the interest rate, what fees must be paid?
A one-time application and evaluation fee of P2,000 for every P 1.0 M, a front-end fee of 1% of approved loan , and a commitment fee of 0.125% of the unavailed balance for long term loans.
Who are the participating GFIs?
Interested entrepreneurs may approach the head office or branches of the following GFIs:
