Government Business Loan Philippines

Business Loan Defined

Business loans, by definition, are financing arrangements made between the business owner and the lender. The lender will provide the money that the business owner needs for his business, and in return, he must pay it back on the agreed-upon schedule, with interest. Some lenders demand collateral and there are others who do not. Banks, private/online lenders, and the government are the most common sources of business loans in the Philippines.

Where to Get Government Business Loans in the Philippines?

DTI Pondo sa Pagbabago at Pag-asenso (P3) Program

The Department of Trade and Industry (DTI) initiated the Pondo sa Pagbabago at Pag-asenso (P3) Program to support self-employed or small company owners in their attempts to grow their businesses. The primary goal of this is to prevent Filipino microentrepreneurs from becoming victims of loan sharks. Market vendors, sari-sari store owners, stall owners, and other cooperative members are the intended beneficiaries of the P3 program.

Loan Features

Loanable Amount: ₱5,000 and up to ₱200,000 for businesses with at least one
(1) employee

Interest Rate: 2.5% per month

Qualifications

• Must be a Filipino citizen physically fit for the preferred business 
• Has proof of at least a year of business activity 
• Has a maximum asset size of ₱3 Million 

Documentary Requirements 

• Duly accomplished loan application form 
• Business Registration / DTI Business Name Registration / Valid ID / Barangay Clearance

How to Apply

To apply, qualified borrowers may submit their requirements to the nearest Negosyo Center, DTI Regional or Provincial Offices, and Credit Delivery Partner (CDP). They may also check the complete list of verified micro-financing institutions (MFI) and phone numbers available on the DTI website for further information.

Land Bank OFW Reintegration Program (OFW-RP)

Land Bank has collaborated with the Overseas Workers Welfare Administration (OWWA) to make the OFW-RP a reality. The major goal is to assist the country’s modern-day heroes in discovering alternative sources of income other than their overseas employment. Borrowed funds can be used for working capital and fixed asset acquisition. 

Loan Features

Loanable Amount: Minimum of ₱100,000 with the following loan ceilings:

• ₱2 Million for sole proprietorships
• ₱5 Million for an OFW group (partnership, corporation, or cooperative)

Interest Rate: Fixed 7.5% per annum for short-term and term loans

Loan Term: 

• Maximum of one (1) year for the short-term loan
• Based on cash flow, but no longer than 7 years, inclusive of a maximum two-year grace period on the principal for the term loan

Collateral Accepted: Object of financing and/or other approved collaterals/security to the bank

Project Cost Sharing:

• Borrower’s Equity must be minimum of 20% of the Total Project Cost (TPC) 
• The loan should be a maximum of 80% of TPC

How to Apply

• Visit your nearest OWWA office for orientation, eligibility screening, processing, and any necessary training.
• Acquire the necessary OWWA certification for submission to Land Bank.
• For further information and to have your project proposal evaluated, go to the nearest Land Bank Lending Center/Lending Unit.

SBC Micro Multi-Purpose Loan 

The Small Business Corporation (SBC) through the Department of Trade and Industry (DTI) initiated the RISE UP Multi-Purpose loan program, which seeks to help MSMEs that have weathered the last two years of crisis by offering them loans with friendly interest rates and easy access. One of the products available through this program is the Micro Multi-Purpose Loan, which is designed specifically for multi-sectoral microenterprises and provides the following benefits:

Loan Features

Loanable Amount: Maximum of ₱300,000

Interest Rate: 12% per annum based on diminishing balance exclusive of DST 

Loan Term: Maximum of 3 years (including the grace period)

Grace Period: 3, 6, 9, or 12 months options but only on the principal amount

Business Track Record: At least one year as evidenced by business permits

Requirements

• A valid government-issued ID
• Barangay Certificate for loans that are not more than ₱100,000
• BMBE Certificate or Mayor’s Permit for loans that are more than ₱100,000
• The business operation’s relevant photos and videos of operations
• Applicable corporate documents

How to Know Whether Government Business Loans Are Right For You?

Similar to loans offered by other financial institutions, government-provided business loans in the country have their privileges and drawbacks, and you must review both in order to determine which one outweighs the other and make an informed decision.  

Generally, government business loans have high loanable amounts ranging from thousands to millions that you may receive at low-interest rates. Such an amount may help you to cover numerous business purchases and needs, allowing your business to grow and expand. Government business loans also have basic standards, fairly similar to personal loans. But, getting one demands the luxury of time and patience in completing the seemingly endless list of paperwork. 

If you match all the eligibility criteria, have no issues with the loan offer, and can adhere to the use of fund limitations, you may then proceed to apply for the government business loans that are the most ideal for you.

Conclusion 

Business owners, particularly those lacking in capital and collateral, may find the terms of a bank or private loan inconvenient. This is why government business loan programs are so important, especially for individuals who have been turned down by other lenders. Not only does it assist them financially with their business, but it also gives them encouragement to pursue innovation and entrepreneurship – provided that the loan is within their financial means.