SB Corp. focuses on franchise borrowers

The Small Business Corp. (SB Corp.) has set aside this year some P100-million for lending to franchisees of such recognized franchisors as Chowking and Caltex Philippines Inc.

The P100-million is part of the P4-billion loan portfolio of SB Corp. dedicated to lending to small and medium enterprises (SMEs) in 2004. SB Corp. is a line agency of the Department of Trade and Industry (DTI) mandated to aid financially or throught accredited member banks the SME sector.

In 2003 alone, it extended a total of P18 million to nine franchisees. And it has already extended a total of P50 million to 22 franchisees since 2002.

So far, the nine major franchise firms that are recognized by the DTI lending agency are Figaro Coffee Systems, Informatics Institute, Goto King, Hotshots Food Group, Dencios Bar and Grill, Crystal Clear Water Station, Chowking and Caltex Phils.

The latest additions to the growing list of qualified franchisors are Reyes Haircutters, Julie’s Bakeshop, Dunkin Donuts, Island Souvenirs, and Cater King Corp.

Lending to franchisees falls under SB Corp.’s Franchising for Organizationally Competent and Excellent Businesses direct credit facility or simply FORCE.

Recent dialogues revealed that all the members of the Philippines Franchising Association (PFA) and the Association of Filipino Franchising Inc. (AFFI) are automatically eligible to apply for lending under the FORCE.

"The facility is intended for the start-up or expansion of a franchise outlet and a commissary of support system for the franchising operations," said SB chairman Zorayda Amelia C. Alonzo in a press statement.

The minimum loan amount is P200,000 while the maximum reached P5 million. Repayment period runs up to three years with a six-month grace period, and amortization on a monthly or quarterly basis.

The franchise firm, for example Goto King, guarantees at least 50-percent of the franchisee’s loan to SB Corp.

Interest rates are nine percent for a one-year loan, 11.25 percent for a three-year loan, and 12.75 percent for an exception five-year loan.

Last year, SB Corp. extended a record P2.3 billion in direct and wholesale lending, financing, and guarantees.

"Lending to the small and medium enterprises (SMEs) by the banking system has declined in the past two year, and it seems obvious that we have been able to fill in the vacuum," SB president Benel Lagua said. Data from the Bangko Sentral ng Pilipinas (BSP) reflected a P7-billion drop in lending to the SME sector from March 2002 to December last year. – Ted Torres