WHOLESALE LENDING PROGRAM of Small Business Corporation

1. WHOLESALE LENDING PROGRAM of Small Business Corporation

2. Are the funds of the financial institution limited or mismatched for on-lending to small businesses? SME Wholesale Lending Program • Helps improve a financing institution’s ability to lend to micro, small and medium enterprises (MSME)through funding access at terms appropriately matched with the requirements of MSMEs • Accessible to all financial institutions nationwide including small-sized banks positioned to lend or already lending to MSMEs. • Speedy, rationalized and pro-active servicing to partners

3. Minimum Qualification of the Borrower PFI Must be a financial institution - bank or non-bank financial institution Latest BSP CAMELS Rating of at least “3.0”, if applicable Positive net income for the past three years Past due rate of not more than 20% or 15% if under fast track accreditation

4. Minimum Qualification of the Borrower PFI Capital adequacy ratio of at least 10% for banks; of at least 20% for non-banks With operational MSME lending unit No negative credit record

5. Minimum Qualification of the Sub-Borrower MSME At least 60% Filipino-owned enterprise as registered with DTI or with SEC Asset size of not more than P 100 Million, exclusive of value of land where the project is located Positive income for the past one year based on BIR-filed financial statements

6. Minimum Qualification of the Sub-Borrower MSME Debt-to-equity ratio of not more than 80:20 Not belonging to SBC’s exclusionary list of industries, as follows: Farm-level production involving agriculture, aquaculture and/ or livestock (post-production activities are qualified) 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) Vice-generating activities

7. Terms of SBC Funding • The SBC funding is in the form of a one-year Omnibus Credit Line (OCL) available for the PFI’s short-term and medium-term MSME portfolio. The OCL amount is based on SBC’s assessment of the PFI’s absorptive capacity and Borrower Risk Rate. An increase in the OCL amount may be requested during the life of the loan facility.

8. Terms of SBC Funding • Maximum funding is 90% of the outstanding loan balance of the MSME sub-loan The sub-loan shall not exceed these ceilings:

9. Terms of SBC Funding • The SBC funding may be up to a maximum of 5 years. (The MSME sub-loan’s term though may exceed 5 years.) • SBC offers the following funding options: Short-term portfolio rediscounting - where a batch of sub-loans is funded based on the earliest maturing PN Individual promissory note rediscounting – where there is matching of terms Medium-term on-lending – requires liquidation within 7 days Case-to-case advance drawdown – requires liquidation within 30 days

10. Loan Term to MSME Sub-Borrower The PFI is given a free hand on how to package the loan in favor of the MSME sub-borrower, except for the following limitations: The loan should not be lower than P100 thousand Grace period for permanent working capital loans should not exceed 6 months; not more than one year for fixed asset loans; and grace period should be on principal only Any portion utilized for land acquisition should not be more than 25% of the loan For term loans more than one year, a regular amortization on either monthly, quarterly or semi-annual basis is required

11. Miscellaneous Guidelines • The sub-loan should have a remaining term of at least 70 days. • Portfolio or batch rediscounting should have no less than P500 thousand worth of sub-loans • The sub-loan should be current and with no experience of restructuring within the PFI • DOSRI loans are not eligible. • Co-funding by another wholesale lending facility is not allowed. • Funding for the same sub-borrower is allowed for any number of times within the life of the OCL • Sub-loans refinanced from another financing institution are eligible.

12. Collateral Requirements on the Sub-loan • At least 50% Real Estate Mortgage and/or hold-out on deposit; may be based on the outstanding balance of the loan in the case of amortized term loans • At least 100% CHM and/or REM combination, if 50% REM/hold-out on deposit cover cannot be complied with; may be based on the outstanding balance of the loan in the case of amortized term loans • Tax declarations may be accepted for REM at a maximum loan value of P500 thousand • May be on a clean loan 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 receivables.

13. Handling of Collateral Titles of Ownership • For physical submission to nearest SBC office or any partner LBP depository branch • A Deed of Custodianship suffices for commercial banks and PFIs with platinum accreditation with SBC

14. Pass-on Rates

15. Procedures for Participation • The FI applies for regular accreditation and submits documentary requirements • SBC assess the application for accreditation and conducts standard checking on the PFI inclusive of ocular inspection and interview; and scores the PFI under the SBC Borrower Risk Rating System • SBC approves the granting of an OCL amount in favor of the PFI • The PFI accepts the terms and conditions of the OCL by signing the OCL Agreement • SBC conducts a program briefing in favor of the PFI’s MSME lending unit at the PFI site, upon its request • PFI starts to draw on the OCL by submitting its MSME sub-loans

16. Procedures for Participation • SBC processes the PFI’s loan drawdown request and grants the funding within the agreed schedule • As soon as the PFI’s total drawdown reaches 30% of its OCL, SBC conducts an audit of the PFI on the remaining standard documentary requirements no longer required to be submitted to SBC • PFI services its loan with SBC until full payment, either thru post-dated checks or inter-branch deposit • SBC releases the applicable collateral documents on the fully-paid MSMSE sub-loans

17. Regular Accreditation and Credit Line Approval • Corporate papers • Board resolution to borrow from SBC and on authorized signatories • Articles of incorporation and By-laws • Ownership and management profile, and corresponding personal data sheets (as submitted to BSP, if applicable) • Profile of MSME lending unit • Briefer and/or annual report

18. Regular Accreditation and Credit Line Approval • Applicable financial reports, as submitted to BSP in the case of banks • CAMELS Rating • Latest interim financial statements (not more than 3 months old) • Past 3 years financial statements • Latest risk-based capital adequacy ratio report • Year-end report on specific and general loan-loss provisioning • Latest status report on DOSRI loans • Profile of accreditation with other lending programs • Interview, ocular inspection, credit investigation and risk rating by SBC

19. Fast track Accreditation On a case-to-case basis, SBC may grant a token OCL of not more than P5 million to PFIs without them having to submit the standard documents. This is for as long as the PFI is proven to qualify under SBC’s minimum criteria for accreditation. Any OCL increase shall go through the standard evaluation requirements.

20. Implementation of Approved Credit Line • Signing of the OCL Agreement • Submission of Certificate of Good Standing from BSP or any proof that the PFI is active under BSP’s funding program • Briefing by SBC for the PFI’s implementing unit, if requested by the PFI

21. Availment on the Approved Omnibus Credit Line • For submission to SBC prior to loan release: Updated financial statements of the PFI (not more than 3 months old) Information sheet and collateral profile of the MSME sub-borrower (SBC forms) as accomplished by the PFI PFI loan approval in favor of the MSME sub-borrower MSME sub-borrower’s Promissory Note with Consent to Assignment, Disclosure Statement and Amortization Schedule

22. Availment on the Approved Omnibus Credit Line • For submission to SBC prior to loan release: • Applicable Collateral Documents • Mortgage contract between the PFI and sub-borrower • Proof of sub-borrower’s ownership of the collateral as annotated in favor of the PFI; or Certificate of Custodianship for qualified PFIs

23. Availment on the Approved Omnibus Credit Line • Should be available at the PFI office for SBC post-release audit: Loan agreement between the PFI and sub-borrower, if applicable PFI’s loan ledger on sub-borrower Sub-borrower’s BIR-filed financial statements (not more than 1 year old) Sub-borrower business registration Sub-borrower’s certification of environmental compliance, if applicable Collateral appraisal of PFI and supporting documents on sub-borrower tax and insurance payments, if applicable

24. Window for Graduating Micros • Sub-Borrower Definition • With asset size of not more than P3.0 million;and • Total loans inclusive of the PFI’s is not more than P500K

25. Window for Graduating Micros • Consideration Granted • Maybe on clean basis in terms of collateral cover • Any valid business permit will suffice as business registration • Financial information may be based on calculations as certified by the PFI

26. Window for Graduating Micros • Validity Period – the graduating micro may be funded by SBC under these relaxed terms for a period of not more than four years.

27. Pass-on Rate • Loans with term of 365 days and below 7.5% p.a. - For banks and bank-affiliates 8.0% p.a. - For non-banks • More than 365-day loans - Plus 0.5 percentage point premium

28. PFI Qualification • All types of PFIs are recommended to be qualified to aval under the Window as long as the financial institution has passed the accreditation system of SBC, whether under SME wholesale lending or microfinance wholesale.

29. PFI Qualification • This means that non-banks may also participate under the window. Except for bank affiliates and leasing companies, however, non-banks remain to be not allowed under the SME Wholesale Lending Program, consistent with existing policy.

30. END OF PRESENTATION Thank you