Business Mirror
Feb 21, 2006
Figaro taps SB Corp. for coffee businessmen
FIGARO Coffee Co. Inc. has tapped a government financial institution to lend money for entrepreneurs wanting to go into the coffee business.
Ma. Luna C. David, Small Business Guarantee and Finance Corp. (SB Corp.) vice president in a briefing said Figaro tapped SB Corp. for a P10-million loan guarantee.
SBCorp., the lending arm of the Department of Trade and Industry, in 2005 lent a total of P563 million to exporters, franchisees, domestic manufacturers, information technology service providers, start-up entrepreneurs, and microentrepreneurs.
Figaro chief executive Pacita U. Juan told BusinessMirror that the loan facility is the "first of its kind where a borrower need not pledge a security like real estate or chattel."
"All one needed was a guarantee from his/her franchisor," Juan said, adding that the borrower would have to put up 30 percent in equity.
"Say for a P5-million total investment package in a Figaro franchise, a franchise applicant could borrow 70 percent or a cap of P3 million," Juan said.
Figaro's total portfolio for this facility would be based on its ability to guarantee the loans.
The 12-year-old coffee company has grown despite a slump in world coffee prices and a decline in the country's coffee production. It now has 52 stores, with two in China and one in Dubai .
Juan said that putting up a Figaro franchise store costs anywhere from P3 million to P6 million, depending on the size of the outlet and the model, whether it a full store, kiosk, among others.
Under the loan guarantee program, the applicant in effect borrows directly from SB Corp., while Figaro as franchisor becomes a third party guarantor, she added.
SB Corp.'s Small and Medium Enterprise financing for organizationally competent and excellent (SME-Force) franchise businesses is a direct medium-term lending facility for start-up companies or the expansion of a franchise outlet.
Based on SB Corp.'s guidelines, Figaro was approved as guarantor since it has a commissary and support system and with existing franchises posting positive net income.
Juan said tapping SME-Force began three years ago when SB Corp. met with representatives from the Association of Filipino Franchisers Inc. (AFFI) to create a product that would serve as a fund source for would-be franchisees.
To set an example that the scheme would work, Figaro availed of the SME-Force for some of its franchise applicants that year, according to Juan.
"More than just a credit facility, the program encourages franchisors to be responsible enough in granting franchises," Juan told BusinessMirror through electronic mail.
"As you are ultimately the sole guarantor of the loan you have to be sure of the location you give the franchisee before you award the franchise. If the franchisee fails to pay the loan, you as franchisor will assume the responsibility of paying up," she added.
Interest rates for SME-Force is 14.5 percent a year for a three-year loan, with a six-month grace period. Juan said Figaro's franchise term is five years, "so in effect the franchisee has two more years after loan is fully paid to enjoy a loan-free income."
Franchisers wanting to tap the SB Corp. Figaro facility should have an asset size of not less that P500,000 and not more than P100 million, excluding the 0..value of the land and at least 60-percent Filipino owned.
SB Corp.'s retail lending has seen a 35-percent decrease from its P687-million lending in 2004 to just P440 million last year. Likewise, according to SB Corp.'s David, total borrowers decreased in 2005. "On the fourth year of this program, the decrease was partly deliberate on our part since we're developing new models for pre-bankable entities," David said.
Retail program borrowers were mostly from the home furnishing industry (20.7 percent), followed by the food products industry (9.1 percent) and wearables (8.1 percent). Others that have tapped the program include giftware and holiday décor, transport/motor vehicle parts and services, microelectronics, IT and telecommunications, and professional services industries. Dennis D. Estopace
No comments:
Post a Comment