SB Corp strengthens rehab fund for SMEs thru a hammer
The Small Business Corporation (SB Corp), an attached agency of the Department of Trade and Industry (DTI) mandated to develop micro, small and medium enterprises (MSMEs), has established a P700 million enterprise rehabilitation fund (ERF) to finance the recovery of small and medium enterprises in the disaster stricken areas of the country most especially those severely damaged by typhoon Yolanda.
The ERF is envisioned to become one of the regular financing products of SB Corp in response to the need to rehabilitate SMEs in the event of disaster and calamities resulting in their destruction. In the past there was no financing available to SMEs adversely affected by natural disasters and calamities.
In a fellowship and assessment program of the ERF held at the Sofia’s Way, Leyte Park Hotel in Tacloban City, the SB Corp and DTI honored some 140 entrepreneurs with a symbolic hammer as their token of faith and support in rebuilding enterprises and the community.
According to Maria Luna Cacanando, SB Corp OIC-COO and Financing and Capability Building Sector Head, the symbolic hammer is a builder’s tool, an apt symbolism for the ERF program’s role in rebuilding lives and enterprises. In addition, the hammer is a simple yet reliable tool, maximizes the strength of its user, and does not easily give up.
Reinforcing the symbolic message of the hammer, Congressional Committee Chair for Small Business and Entrepreneurship, Niel Benedict Montejo of the House of Representatives in his keynote speech challenged the SMEs to make the best of the opportunity to rebuild their businesses.
“Show the world that we can rebuild new businesses better than what we have lost. The ERF is above all your program. Its mission and its success depends on you, the entrepreneur. Show that you deserve the trust given to you by SB Corp and DTI. Find strength with one another and be conscious that you were selected because you did not just sit and wait for help. You were trying to rebuild early on even before assistance has arrived,” Montejo emphasized.
In the same event, the SB Corp awarded the loan proceeds to selected SME borrowers engaged in various kinds of businesses ranging from agriculture business, food services, trading to waste recycling projects.
The ERF has two main criteria for borrower selection: one is that the enterprise was an on-going business, duly registered prior to the calamity; and that the enterprise was badly damaged by the ensuing calamity.
”We recognize the ERF borrowers for their unwavering determination to rise above their losses and difficulties brought about by Typhoon Yolanda. Together, we commit to achieve business rehabilitation and continued employment generation in support of the recovery of the local economies,” Cacanando explained in a testimonial to the beneficiary-enterprises.
The ERF loans range from P200 thousand to P5 million per enterprise. But Cacanando made clear that it is a rehabilitation fund, not an expansion fund. It will assist the small enterprise jumpstart after the calamity at a level sufficient to start generating sales again and providing the needed jobs and business operations to bring back to life local economies.
“The loan extended by the ERF program may be used to finance only assets that will produce sales such as: new inventory, equipment purchase or repair, and building construction and/or repair. ERF cannot reimburse the enterprise of its losses for accounts receivable that can no longer be collected nor inventory and fixed assets washed away by the typhoon,” Cacanando explained.
The fund is a pioneering effort of the SB Corp to grow and support SME recovery in calamity affected areas so they will be able to get back on their feet and grow their business again.
In consideration of the predicament of the SME destroyed by the natural calamity, the SB Corp has adopted SME-friendly policies under the ERF.
Audited historical financial statements are waived. No administrative fees are imposed. Interest rates are subsidized. Grace period is longer on both interest and principal. And the principal amortization is tapered, from low to gradually going high coinciding with the recovery trend of the business.
With this relaxed policy, SB Corp makes sure that SMEs will have a good chance at recovery, and in the end SB Corp can manage its risks.
Furthermore, with the help from DTI, SB Corp ensures the likelihood of success in project implementation with the following measures: post disaster needs assessment (PDNA) by DTI on the loan applicant’s enterprise, loan releases are done strictly in tranches with project inspection by SB Corp, and a monthly project inspection during the first year of the loan.
“Given the said policies and implementation strategies, the SME financed by the ERF is indeed skewed for success”, Cacanando said, “Hopefully the foray of SB Corp into financing for SME rehabilitation will be successful and be sustainable to meet the needs of disaster-affected areas. But more importantly is that all ERF borrowers who have successfully implemented the rehabilitation project will be invited to apply for their expansion loan with SB Corp after their first year of loan repayment. That is the real proof of ERF’s success”