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Funding and Government Programs for MSMEs in the Philippines (2022)
Starting a business

Funding and Government Programs for MSMEs in the Philippines (2022)

Starting a new business isn’t easy. There is a wide array of costs to cover, including researching market trends, testing new products, and securing your inventory. 

Fortunately, up-and-coming entrepreneurs have various small business funding options to choose from if you know where to look. But securing this funding may be hard when you’re in the early stages of starting a business. 

The application process can be tricky, and not every grant works for every business. Read this article to discover everything you need to know about the different funding options for small businesses and how to apply for funding. 

How to Apply For Funding For Small Businesses in the Philippines

Micro, Small, and Medium Enterprises (MSMEs) are vital to the growth and development of the economy. Thus, several government programs in the Philippines are made especially for MSMEs. Here are five aspects you need to consider when applying for funding:

Step 1: Determine Your Reason For Needing Business Funding 

When you're applying for business funding, you need to do it for the right reasons. Appropriate use of funding includes purchasing equipment or real estate, business expansion, increase of working capital, and financing a franchise. 

Step 2: Determine How Much Money Your Business Needs

Before applying for business funding, it's essential to estimate the amount you need for your business based on your reason for getting business funding. 

If you ask for too much money, your loan provider may doubt your credibility as a business owner. If you ask for too little, you'll deal with problems like lack of funds to purchase critical equipment for your operations or lack of working capital. 

Step 3: Check If You’re Eligible For Business Funding

Here are some general requirements that may apply to all funding you come across: 

Sole Proprietors 

  • Filipino citizens between 21 and 65. 
  • A good credit standing. 
  • Business owners with two years of profitable operations at least. 
  • Non-entrepreneurs, whether employees or professionals, with at least two years of steady income. 

Corporations/Partnerships 

  • A good credit standing. 
  • Business is registered with SEC or DTI with a minimum of 2 years of profitable revenue. 
  • A minimum annual gross sales, depending on the bank. 

Step 4: Find The Best Business Funding To Suit Your Business Needs 

There is a variety of short-term and long-term funding for MSMEs and franchising businesses. Don’t pick just any.

Research which loan provider can meet your business funding needs and then review the features of that loan. 

Step 5: Submit The Required Documentation 

Gather all the required documents and submit original copies and photocopies. Here’s what you will be required to submit: 

Basic Documents 

  • A signed and completed loan application. 
  • A valid ID. 
  • Your latest bank statements. 
  • Your latest income tax returns (ITRs). 

Business Documents for First-time Entrepreneurs 

  • Your resume. 
  • A certificate of employment. 
  • Your latest pay slips. 

Business Documents for Business Owners 

  • Your company profile or business background. 
  • Your latest audited bank statements. 
  • Board resolution, if you own a corporation. 
  • A business permit or SEC/DTI registration certificate. 
  • Articles of Incorporation or Articles of Partnership. 
  • List of major customers and suppliers with details about dealings. 

Once you’ve finished the final step, it will take about 3-7 days for your application to be processed. 

Grow Your Business With QuickBooks

Ways to Fund A Small Business 

It’s important to understand both the risks and benefits that come with each type of funding. How you fund your business directly affects how you will structure and run your business. Discover which business funding works best for you. 

Get Venture Capital From Investors 

Investors can offer you funding through venture capital investments. Venture capitalists usually offer funding in exchange for an active role in the company or ownership share. This means you’ll have to give up a portion of control in exchange for funding.

Here’s how they differ from traditional financing: 

  • They focus on high-growth companies. 
  • They take higher risks in exchange for potentially higher returns. 
  • They invest capital in return for equity instead of debt. 
  • It has a longer investment horizon in comparison to traditional financing. 

This is not to be confused with Angel investors, who invest in your company with the same benefits, but do not expect a share of your business. 

Get A Small Business Loan From Traditional Banks 

To secure bank loans, you need to have an expense sheet, a business plan, and financial projections for the next five years. These tools will help you understand how much you need to ask for. 

Get QuickBooks’ expense tracker software for the best results. This app provides you with data that helps you predict and manage your cash flow and finances. 

Receive Funding From Friends and Family 

Borrowing money from friends and family is an ideal solution for funding your startup. This is because friends and family typically expect a lower return on investment, sometimes they may even want nothing more than to see you succeed. Of course this isn’t possible for everyone but if you can turn to your friends and family, you should explore that option

Apply For Government Funding Opportunities 

The eligibility criteria for Philippine government grants for small businesses can be quite strict. The government wants to invest in companies that enhance policies on which the government is currently focused. These can include charity, community business projects, or eco incentives. 

Philippine Government Programs 

99.5% of businesses in the Philippines are MSMEs. Thus, the government has created several programs and Philippine loans for small business startups to support these companies and ensure their success. 

Small and Medium Enterprise Roving Academy (SMERA)

SMERA is a learning program for developing MSMEs in the Philippines. Business owners who participate in this program are provided with a counsellor and expert who offer advice on business development services and training they may need. 

Go Lokal! 

If you’re looking for a broader market for your unique products, the Go Lokal! Government program is perfect for you. This program gives your products to Go Lokal! partner stores and retail establishments within the Philippines. These include Robinsons Malls, Ayala Malls, and Duty-Free, to name a few. 

Pondo sa Pagbabago at Pag-Asenso (P3) 

This Philippines government loan for businesses translates to Fund for Change and Growth in Tagalog. The Small Business Corporation (SBC) encourages loan sources to fund promising MSME entrepreneurs. These entrepreneurs can borrow from P5,000 to P200,000 with a low-interest rate of 2.5% per month. 

Small Business Technology Transfer (STTR)

The STTR program aims to promote high-tech innovation in the research and development sector. They achieve this by funding technological research for small businesses. 

How To Get Funding For A Small Business 

There’s no single set of criteria for business funding in general. But there are certain aspects you can focus on to ensure you choose the correct funding by being thorough. 

Look For Grants In Your Industry. 

Focusing on organizations within your industry will give your business more recognition. In addition, you’ll also be able to build connections with industry figures. These figures may offer guidance and investment opportunities. 

Read and Understand the Eligibility Requirements. 

It’s essential to read the requirements carefully to ensure you’re applying for the proper funding. Otherwise, you could be putting unnecessary effort into an application you don’t qualify for. 

Does Your Business Align With the Organization’s Mission? 

Ask yourself if your business plan contributes to achieving their goal. If it doesn’t, you should apply for funding with another organization. 

Determine What You’ll Spend the Grant Money On 

Incorporate what your grant money will be used for in your business plan. This also helps organizations understand how your business aligns with their mission and what they’re willing to pay for.

Emphasize Innovation and Expansion In Your Pitch 

Grants for startups prefer to fund businesses they see as innovative and forward-thinking. When making your pitch, focus on the new technologies you may be developing, how you plan to grow your business, and how your business can help the organization achieve its mission. 

QuickBooks covers a variety of business-related topics for MSMEs in the Philippines. Explore more free Small Business Resources at the QuickBooks Resource Center to help grow your business in the Philippines today.