Economy · August 6, 2022

Loans for businesses in full inflation

The economy grew 8.3% in the first quarter, in a promising start to the year, with the reopening of more industries. With infection levels declining and blockades easing, the Philippines is trying to recover from the previous two years of the pandemic.

However, inflation has also increased, reaching 6.4% in July, and the Bangkok Sentral ng Pilipinas (BSP) is trying to mitigate its impact on the country. From rising oil prices to rising interest rates, the effects of inflation are being felt a lot.

The BSP, which raised policy rates in an attempt to moderate inflation, should continue to do so. BSP rates are used by banks and finance companies as a benchmark for their financing, credit cards, and deposit rates, so consumers can expect to pay more in the future.

Small and medium-sized enterprises (SMEs), which make up 99% of all businesses in the Philippines, are facing an uphill battle for growth. Due to rising interest rates, it has become more difficult for these companies to get the finance or support they need.

First Circle, however, will not go the path of higher interest rates. As announced by CEO Patrick Lynch on July 21, the fintech firm will maintain its standard interest rates – starting at 1.39 per month – at least until the end of 2022. This is a good sign for companies as they will continue. to have a favorable financing option.

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With its revolving line of credit, First Circle can help alleviate cash flow gaps and other operational expense problems. What makes the product very beneficial is that businesses don’t have to spend a single peso in case of availability and instead only spend once they use the line. This can be seen as “insurance” considering all the uncertainties the country is facing.

Initiatives like this by financial companies are huge for companies, especially startups that have yet to establish credit scores. While BSP rate hikes may be inevitable, it is important that the financial sector continues to support SMEs. As interest rates and commodity prices continue to rise, SMEs will need credit lines and non-traditional members of the financial sector who have the ability to hold their own rates at bay could be crucial.

Not only are lines of credit beneficial to businesses, but they are increasingly becoming a necessity. The underlying factor here is the cost of this financial support. With companies like First Circle going to great lengths to continue putting stakeholder interests first, there is hope that SMEs can overcome inflation.

Martin Lacson is Head of Sales Training and Development for First Circle’s Sales Acquisition Department. For e-mail inquiries [email protected]