The Philippine Startup Community have no dearth of ideas and concepts. In fact there is already a surfeit of ideas that it is not only confined to Manila but in other regional centers such as Iloilo, Davao and Cebu. This was and continues to be brought about by the explosion of technology and the demand for better products and services.
But the real bottleneck in the development of these startups are not in the ideas and concepts department. Like any other business, be it traditional or non-traditional the critical area is funding the idea for development and implementation. Also, startups may have already taken off but the need for expansion in order to be able to attain the economies of scale needed is another obstacle that the solution is additional funding.
The Philippine financing system has yet to catch up with the evolution of the global economy with regards to startups. The most crucial requirements are 3 years profitable track records and security. Since most of these startups really start from scratch, they are automatically not qualified for financing by traditional financial institutions.
In this regard, Venture Capitalists are the sought after havens. Creative ways of having “security” for these investors have been developed such as equity in the enterprise itself. But in truth, a 20% startup capital is way below what is needed. In fact, a startup must have a war chest of 100% Capital Expenses and enough Operational Expenses to operate for at least 6 months at a loss in order to make its first stride.
Thus, an impasse in financing for startups and even expansion funding for existing startups.
Realizing this, the startup community is being assisted along the way by Kickstart which has already hosted 40 events that aims to get the critical segments of the startup community to a more coherent aggrupation so as resources and information can be shared.
In the latest Raid the Fridge event, Kickstart featured LoanSolutions as presented by Jean-Patric Bisson, CEO and cofounder of the fintech startup. JP as he is more popularly called discussed that LoanSolutions can find Find better loan alternatives in the market for those that require financing.
The Market Opportunity in Philippine banks is already large enough to support startup financing considering that US$99 billion is the annual loan portfolio of Philippine banks of which US$20 billion is in consumer loans.
The obstacles for tapping these financial resources are the following:
No Central Credit Bureau
Banks are conservative with regards to lending guidelines
The challenges are inherently systemic and LoanSolutions is an online portal wherein the borrowers are matched with potential funders. The advantages for utilizing LoanSolutions is that it is:
But this is just one step in attaining the dream of better financing for startups and SMEs in general.