Small Business Corporation (SBC) offers its mSME Wholesale Lending Program to provide funding to financial institutions nationwide for lending to mSMEs.  It improves the ability of these institutions in mSME lending.  The Program provides funding access even to small conduits in the countryside which have positioned as mSME lenders.

It provides funding at terms properly matched with the requirements of mSMEs. 

The Program impacts on the vision to have vibrant mSMEs through ensuring liquidity in the financial system for mSME credit by granting banks better cost efficiency and opening up more credit opportunities for mSMEs.

The Program rolls into one various credit facilities for (a) Microfinance, (b) Window for Graduating Micros and Barangay Micro Business Enterprises (BMBEs), and (3) SME Wholesale Lending.  Thus, PFI applies for an OCL and requests a sub-limit for the credit facility it wants to tap.  Loan documentation is simplified, too.  The PFI only signs a mother loan agreement and subsidiary loan agreement for the facility it will utilize or tap.

To know how to be a participating financing institution (PFI) under the Program, please contact Mr. Daniel M. Gonzales, Vice President for Development Finance Group at 751-1888 local 1772.)

1. Must be a bank or NBFI 
2. Must have an operational mSME lending unit
3. Positive net income for the past three years
4. CAMELS Rating of at least “3” for banks and bank-affiliated companies
5. Past due rate of not more than 20%, but not more than 15% under fast-track accreditation
6. Capital adequacy ratio of at least 10% for banks; or at least 20% for NBFIs
7. With no negative credit record

1. Must be at least 60% Filipino-owned mSME per DTI or SEC registration
2. Must have assets size of not more than P100 million exclusive of the value of land where the project is located
3. Must have positive income for the past one year and debt-equity ratio of not more than 80:20 based on BIR-filed financial statements
4. Must not belong to SBC’s exclusionary list of industries:
   
   
   • Real estate development (MSME contractors are qualified) ;
   • Pure trading of imported commodities (unless value-added services are employed which impact positively on the domestic market); and
   • Vice-generating activitie

1. SBC funding comes in as a one-year revolving Omnibus Credit Line (OCL) available for the PFI’s on-lending to mSMEs.  The amount of OCL is based on SBC’s evaluation of the PFI’s absorptive capacity and Borrower-Risk Rating (BRR).  Any increase in the OCL may be requested during the life of the credit line.
   
   
2. SBC funding shall be up to 90% of the outstanding loan balance of the MSME sub-loan, but not to exceed these ceilings:
   
   

   Type of bank	CC            Ceiling per mSME sub-borrower
   Commercial banks Thrift banks Rural banks	P25.0 million P20.0 million P15.0 million

   
   
   
3. SBC funding may be up to a maximum of five years. (The sub- loan may exceed five years.)

1. A regular drawdown by the PFI on its credit line to obtain SBC wholesale funds may be done in any one of the following options:
2. Short-term Rediscounting:  a) Portfolio rediscounting where a batch of sub-loans must amount to not less than P500 thousand and is funded based on the earliest maturing PN; b) Individual rediscounting where rediscounting is matched with term of a single promissory note
3. Medium term on-lending which requires liquidation within in seven days
4. Advance drawdown which shall be up to 30% of the credit OCL and requires liquidation within 30 days
5. (Advance drawdown is open to commercial banks.  Thrift and rural banks may qualify for an advance drawdown if they have BRR score of “4” or better, and the advance drawdown shall be up to 20% of OCL.   This mode is available under the Window for Graduating Micros, too.  Under the Window, non-bank PFIs must have a BRR score of “4” or better.)

PFIs are given a free hand packaging the loan in favor of the mSME sub-borrowers except for these limits:

1. Loan shall not be lower than P100.0 thousand.
2. Working capital loans against receivables and/or inventory should be short-term.
3. Grace period on term loans: 

      -For working capital loans, it shall not exceed six months
      -For fixed asset loans, it shall not exceed one year

1. Any portion of the loan used for land acquisition shall be up to 25% of the loan.
2. Term loans should have a regular amortization either on monthly, quarterly or semi-annual basis.
3. Under individual rediscounting, monthly amortized sub-loans may be funded by SBC under quarterly amortization provided that maturity date of the SBC-PFI loan shall not exceed that of the sub-loan.

(Miscellaneous guidelines)

1. Sub-loans should be current; have a remaining term of at least 70 days; and have               no experience of restructuring with the PFI.
2. Must not be DOSRI loans.
3. Sub-loans refinanced by another financial institution are qualified.
4. Funding for the same sub-borrower may transpire for any number of times within the life of the OCL.
5. Must not be co-funded by another wholesale source

(SBC’s policy is to require collateral from the mSME borrower if he has any property to offer, but collateral per se is not a determinant in approving or denying a loan.  SBC in its efforts to shift from asset-based lending to risk-based approach has made its collateral policy flexible for mSMEs.)

1. At least 50% REM and/or or hold-out on deposit; and based on the outstanding balance of the loan in the case of amortized term loans
   
   
2. 100% CHM and/or REM combined if “a” cannot be complied with (If “b’” cannot be complied with, SBC limits the amount of loan to 70% of project cost for fixed asset loan or 80% of the sub-loan instead of the regular 90%; and in whichever case SBC shall charge an additional risk premium of 0.5%.)
   
   
3. Assignment of receivables but with clear collection capture mechanism by the PFI for working capital loans secured by receivables and/or inventory
   
   
4. The subject of financing shall be required as collateral for fixed asset acquisition loans with finance and leasing companies
   
   
5. Tax declarations may be accepted for REM at a maximum loan value of P500.0 thousand
   
   
6. May be on clean basis if covered by a Tripartite Agreement between the PFI, the sub-borrower and its anchor firm-buyer, providing for a sound collection capture mechanism in favor of the PFI. In lieu of hard collateral, there shall be an assignment of the receivables.

(Miscellaneous guidelines on handling collateral documents)

1. For physical submission to nearest SBC Area Office or Desk Office
   
   
2. A Deed of Custodianship with Undertaking suffices for commercial banks and PFIs with platinum accreditation with SBC

(SBC’s policy is to price its wholesale loans in a way that is market-oriented and allows it to recover its costs and exact a reasonable profit margin.  Please click the “Pricing” button on your webpage to check SBC’s existing pass-on rates. )

1. A financial institution applies for regular accreditation under the mSME Wholesale Lending Program at any nearest office of SBC with the complete documentary requirements in proof of its eligibility.
   
   
2. SBC assesses the application by conducting standard checking which includes a bank visit, BRR evaluation, interview of its management team, and approves an appropriate credit line for the institution.  At its end, SBC may offer an FI a token OCL amount under the fast track accreditation mode.
   
   
3. PFI enters into a loan agreement with SBC, namely, the Omnibus Credit Line Agreement, after which the FI is formalized as one of SBC’s Participating Financial Institutions (PFIs).
   
   
4. PFI may request for a briefing to its MSME lending unit on how to utilize the OCL. SBC has the option to conduct it at the PFI site.
   
   
5. PFI may start drawing on the OCL by submitting its mSME sub-loan documents as required under the Program.  (If SBC has a partner depository bank in the area, the PFI may opt to have its original collateral documents forwarded there instead.)
   
    
6. SBC processes the PFI’s loan drawdown request and grants the funding within the agreed schedule.
   
   
7. As soon as the PFI has drawn about 30% of the OCL, SBC conducts a spot audit to check standard documentary requirements that are no longer for submission to SBC.
   
   
8. The PFI services its loan with SBC until full payment, either thru post-dated check or inter-branch deposit.
   
   
9. SBC releases the applicable collateral documents of the fully-paid MSME sub-loan.

1. The Window for Graduating Micros and BMBEs is a wholesale lending facility meant for mezzanine micro enterprises which gear towards bank credit at terms outside the borders of microfinance and for other micro enterprises registered under the BMBE Law.
   
   
2. This Window has been unified under the mSME Wholesale Lending Program this year, and it has similar terms and conditions with SME Wholesale Lending.

1. Minimum loan availment under the Window shall be P100 thousand.
   
   
2. The Window charges an evaluation fee equivalent to .05% of the credit line.
   
   
3. The Window charges an availment or processing fee equivalent to 0.1% of loan availment on non-bank PFIs.
   
   
4. SBC funding may be availed on a clean loan basis.