Urgent pleas for help by MSMEs

Quite a number of pleas for help are coming in from the micro, small and medium enterprise (MSME) sector. Carlos Tan is one of them, and he presents a concern that no doubt many of other entrepreneurs like him face. Let’s hear what Mr. Tan, whose letter follows, and Romulo Antonio, another reader, have to say.

“You have pointed out the problems facing the reopened businesses of MSMEs. Let me mention another financial burden given to the reopened businesses of some MSMEs that may imperil their sustainability.

“Let me start by saying that the business model of a typical MSME is very simple. Sales generated by the business solely provide the funds in paying operating expenses. Any excess or shortfall in sales against operating expenses represents business gain or loss. Transactions are on ‘cash or current basis.’ ‘Current’ means a 30-day cycle.

“Therefore, the prolonged lack of sales that took place during the lockdown period resulted in total failure to pay the operating expenses-principally rentals on leased premises.

Unpaid rentals

“The proper treatment of the huge unpaid rentals (covering three months’ rentals) accruing during the lockdown period is the issue at hand, though this is only insofar as MSMEs operating in non-mall establishments are concerned, since most mall owners had already publicly announced a waiver on the collection of their rental incomes.

“Apparently, to encourage business reopening, which was needed in igniting the stalled economy, President Duterte, during the IATF (Inter-Agency Task Force on Infectious Diseases) meeting on May 28, publicly exhorted for a condonation of commercial rentals accruing during the lockdown period. He pointed out that requiring tenants to still pay rent while their businesses had been shut down would be like ‘beating a dead horse.’

“Clearly, the President and most mall owners fully understand the MSMEs business model, i.e., without any sales, rentals cannot be paid.

“More importantly, they (President and mall owners) saw the need to condone the collections of those rentals, otherwise, additional financial burden would be given to the reopened businesses, which will pose a serious threat to their sustainability.

“Against that backdrop, DTI (Department of Trade and Industry) surprisingly issued its Memorandum Circular (MC) No. 20-31 on June 4, prescribing for a deferment on the collection of commercial rent arising during the lockdown period, with the uncollected rental, to be paid after the lockdown in six monthly installments (though the MC contains a request for condonation). But between a deferment and condonation, landlords would most likely opt for the former, just like what we experienced with our landlord.

“It has to be pointed out that the said DTI MC created an additional financial burden to the reopened businesses that may cause their demise. At this point, the question that should be asked would be why, in spite of the earlier call of the President for condonation, DTI issued said MC prescribing for deferment. We believe a public expression of the President made during this crisis situation on what he wants to happen on certain issues constitutes a mandate for all concerned to follow.

Reopening challenges

“Besides, it is not possible by any stretch of the imagination that the business once reopened can start paying the prescribed six repayments for the unpaid rentals given these challenges:

• Reduced seating capacity to comply with the required social distancing.

• Reduced patronage because of people’s fear of contamination.

• And, additional expenses for safeguarding the health of workers and customers alike.

“DTI may have in mind the existing lease contracts in formulating subject MC. Again, we believe that under this crisis situation, letters of contracts should yield to business and economic realities.

“In our particular case – a beauty salon with 20 workers – the past unpaid rentals reached almost P200,000. Our operations during the past two weeks yielded a daily average of P5,000 only in revenues. That was not enough for our reduced manpower (we are rotating people)!

“How much more if we will be confronted with a bill for one-sixth of P200,000 at the end of this month as called for under said DTI MC. Nobody knows how long we can survive. As can be learned from the internet, there are others similarly situated.

“Should you find our piece meritorious as a public service, kindly ask DTI to reconsider its position. Better still, if this matter can be brought to the attention of the Office of the President as DTI’s action may be hurting the credibility of the President. I have already written to Sen. Bong Go and Sec. Harry Roque on this, but no response yet. You may have a louder voice than us.”

Financing need

Our next letter sender, Mr. Antonio, shouts out his need for financing to restart his business. He says he applied online with the DTI a week ago. His business, like more than 10,000 other SMEs, needs government help and support.

Mr. Antonio is a proprietor who buys and sells medical supplies in hospitals in Region 12 (Socsargen). His company, if it survives the recent quarantine, will mark its five years of operation come October.

The coronavirus disease 2019 or COVID-19, however, has affected his business. For three months during the lockdown, he writes, he has had no sales. To make matters worse, he could not collect on debts. Mr. Antonio writes that this has been a “double black eye” on his business.

To be able to pay for his family’s daily needs, he has been borrowing money from his siblings in Bulacan. There is a limit to this, though, seeing how they, too, are trying to survive during the pandemic. Mr. Antonio, together with his wife’s help, have now resorted to selling whatever food they can cook.

Like many other business owners hard hit by this pandemic, Mr. Antonio cries out for help from the government to restart his business – and ultimately help in reviving the economy.

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.