Lifelines for SMEs

January 31, 2022 by

With Luzon’s enhanced community quarantine (ECQ) lasting for over two months, many small- and medium-sized enterprise (SME) owners have felt the impact in their businesses. As many SMEs deal with limited sales, non-moving inventories, and reduced foot traffic, entrepreneurs will have to make several difficult decisions to make their financials work for them.

Anticipating these scenarios, both public and private organizations have rolled out various programs and projects aimed at helping SMEs get back on their feet after the ECQ. These projects were the focus of UNAWA’s fourth free webinar, “Navigating the New Normal: Government Lifelines for SMEs,” which featured representatives from both government agencies and private organizations talking about various ways that entrepreneurs can steer their business in the right direction after the ECQ.

In this article, we summarized three ways SME owners can keep their businesses afloat mentioned in the webinar:

1. Apply for the government’s SME-focused loan facilities
Recognizing that SMEs will be among the most affected sectors by the ECQ, several government agencies have rolled out loan facilities, cash assistance programs, and other projects aimed at helping entrepreneurs. One of these agencies is the Small Business Corporation (SB Corp.), which recently rolled out the COVID-19 Assistance to Restart Enterprises or CARES Program, a Php1-billion loan facility targeted specifically to micro and small business owners.

Frank Gonzaga, Vice President for Planning and Advocacy at SB Corp., shared that the CARES Program can help entrepreneurs get back on their feet after the ECQ is lifted. Micro businesses, or those with an asset size of Php3 million or less, can apply for a loan worth up to Php200,000, while small businesses,or those with an asset size of Php15 million or less, can borrow up to Php500,000 from the program.

“What are the purposes for you borrowing [from SB Corp.]? It’s either that you are going to restock your inventory, yung mga perishables niyo gusto niyong palitan (if you want to replenish your perishables) and you need more capital, so you can borrow from us. Or if you think you need more working capital, say for example you’re going digital and you’ll need to hire someone who’s really good in e-commerce, and then you can also borrow from us. Worse is may utang ka na binabayaran (you’re paying a loan) and you need to update those loans, you can also borrow from us to update those loans,” explained Gonzaga.

He added that the CARES Program is only one of several projects that the government is rolling out as lifelines for SMEs. Many other agencies such as the Department of Trade and Industry, Department of Agriculture, and the Philippine Guarantee Corporation are also offering loan programs that target SMEs.

“There are lifelines that you can call, and this is one of the lifelines that the government can offer. We are not the only one lending,” said Gonzaga.

2. Consider talking to investors when raising capital
While they are the most common, loans aren’t the only lifelines that SME owners can take advantage of after the ECQ. For Vince Rapisura, President and CEO of capacity builder SEDPI, he recommends that entrepreneurs raise capital from investors instead so that they do not have to deal with loan repayment terms that may prove harmful to company financials in the long run.

“Rather than looking for loans to restart your business, why don’t you look for investors who would share the risk and the profit with you? If you want to be on the safer side, it’s better to focus on mobilizing investors rather than seeking debt to restart and reboot,” advised Rapisura.

Rapisura points to two possible sources of investments at this time: an entrepreneur’s inner circle, which consists of friends and family; and crowdfunding platforms, where entrepreneurs can pitch their projects and ask for funds from various donors. These sources allow business owners to raise capital in their own terms and have better tabs on how much cash goes in and out of the company.

More importantly, Rapisura recommends investments over loans so that entrepreneurs can have more control over the deal. And if they are offering a product or service that can stand on its own, then Rapisura believes that SME owners won’t have a hard time getting the investments they need.

“The terms and conditions that you have to ask from your investors when they come in is that you still have control over your business,” said Rapisura. “If you have a very good business plan and if you have a very good product or service, and the need is there, madali maka-raise ng funds (it’s easy to raise funds).”

3. Prepare tax documents in advance
One financial obligation that many business owners have been worrying about is how they’re able to settle their tax filings with the Bureau of Internal Revenue (BIR). While the deadlines have been moved because of the ECQ, SME owners will still have to deal with submitting their deliverables and filing their taxes when their business is already strapped for cash.

Mon Abrea, Chairman and Senior Tax Advisor of tax advisory firm Asian Consulting Group, reminds his fellow entrepreneurs that the best way to prepare for tax filing season is to prepare as early as possible. For him, dealing with the BIR only becomes a hassle if the business owner isn’t sufficiently prepared or is only doing the work on the deadline itself, especially with many BIR deadlines potentially overlapping in the near future.

“Mag-ooverlap ang maraming deadline, pero instead na mag-panic kayo, plan it now (Many deadlines will overlap, but instead of panicking, plan it now). Plan it ahead. There are ways to defer payments, and there are ways to reduce taxes. Gawin niyo na po ngayon, hindi kung kailan deadline (Do it now and not when it’s already the deadline). It’s not just being resilient, but we have to be more proactive,” said Abrea.

He also advised entrepreneurs to take advantage of any deductible expenses they may have incurred during the lockdown period. As long as these expenses are properly documented, they can help ease the burden of tax filing for any SME owner.

“Make sure that you maximize whatever possible deductive expenses. Halimbawa, marami sa ating mga kababayan (For example, many Filipinos), even the small entrepreneurs, mga nag-donate (donated) during this pandemic. Might as well use it as a deductible expense,” said Abrea.

Seek the Lifelines for Your Business
Recovering from the ECQ won’t be easy, but SME owners don’t have to do it alone. Both public and private organizations have rolled out various ways that can make this recovery easier, and entrepreneurs only have to be diligent enough to apply for these different projects. Now more than ever, there is no shame in asking for help.

If you want to find out more about other lifelines that the government is offering to SMEs, check out our article on the Philippine government’s 4-Pillar Strategy. We also have a Telegram group where we continuously update members on the latest government releases focused on SMEs and give tips on how businesses can better cope with the effects of the ECQ.

We hope this article was helpful. To get more information, insight, and inspiration, check out the other articles in UNAWA Explainer for more tips on how your business can navigate the new normal.

January 31, 2022
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