Sources of Financing
SMEs generally cite the lack of funding sources as one of the problems they face. There are of course financial institutions that have addressed this problem and financing for SMEs come in many forms.
What then are the alternatives available to SMEs insofar as financing is concerned?
- Loans - Private banks and government banks target those SMEs which generally can offer collateral and in need of funds in the Php10 million to Php30 million range. Special government programs for SME exporters provide for loans in the Php20 million to Php40 million range. There are also government lending programs that cater to SMEs which require funds not exceeding Php5 million per project. In the area of micro-finance, loans in the amount of Php5,000 to Php20,000 are mostly financed by non-government organizations (NGOs) and government agencies.
- Venture Capital – there are a few organizations (such as the Philippine Venture Capital Investment Group or PhilVenCap)) that provide seed capital to entrepreneurs with business ideas that show potential.
- Equity – for most SMEs, savings continue to be the main source of financing, especially when the business is just starting.