FLORO and GEMMA SALINAS, FNDG SHELLS & HANDICRAFTS
The first time Floro and Gemma Salinas, founders of FNDG Shells & Handicrafts, borrowed P200,000 from CARD SME Bank Inc., they didn’t really need the money. In fact, Floro was disappointed to be given a repayment term of six months instead of three months. He figured, the faster they established a good credit history, the easier it would be to get a much bigger loan approved when they really need it.
The couple were used to beating the odds, having moved to Batangas to set up a backyard business in 1986, a phoenix-from-the-flames rebirth of an earlier enterprise they’d shut down in Cebu. At the time, they had very little except improvised tools and P4,000 loaned to them by a former client, who wanted them to keep supplying him with coco shell items. Ground zero for FNDG were a manukan that served as both workshop and living quarters for the Cebuano workers who’d relocated with them, and a kubo that became their home. But they gained a reputation for dependability, and eventually won over a steady clientele.
In 2006, after two decades of supplying handicrafts to the local markets, Floro felt they could start to export, never mind that scarcely eight years had passed since their first attempt went bust in 1994. “Napag-aralan na namin kung saan kami pumalpak, ano yung mga problema dati, at kung bakit nag-fail. Kailangan lang namin ng financing. Nakita ko na ang future requirement ay malaki,” he explains.
And so began their campaign: They stocked up on inventory, streamlined their production processes, kept overhead costs low, and made their loan payments on schedule. Within a year, they’d gone from borrowing P200,000 to borrowing P1 million. They’d also found a buyer in the United States, who’d agreed on a huge downpayment, allowing them to ship seven containers’ worth of items. “Nung bumalik kami sa export noong 2006, wala kaming cancellation, wala kaming delay, kasi pinaghandaan talaga namin,” says Floro.
Convincing CARD SME Bank to loan them money meant undergoing a rigorous review—“Matinding interview kung paano yung business namin, kung sigurado ba kami,” says Floro—but because they had their documents in order, a network of buyers, and only accepted orders that they could finish, the interviewer conceded they could well afford to take out a loan.
Plus, they had the right timing: CARD SME Bank Inc. needed them to prove to the Bangko Sentral that it could lend larger sums—the finance institution was in the process of becoming a thrift bank. “Agresibo sila, kami agresibo din,” says Floro, whose accounting background was an advantage, though he had shifted careers to IT programming long before he and Gemma, a commerce graduate, decided to seriously pursue her handicrafts “hobby.” Both were entrepreneurial: Gemma, who likes cars, also dabbles in auto buy-and-sell, while Floro has just recently bought a boat because he’s testing the waters of Palawan’s tuna fishing industry.
Moreover, the U.S. recession forced large companies and their suppliers to close shop. The companies could not maintain operations because demand had slumped. Luckily, a small player like FNDG was able to position itself so it could still export to the U.S. “‘Yun ang factor na maging successful din kami, kasi lahat nagsasara, ako lang nagbubukas. Yung dati na order nila na P1 million, P300,000 na lang. Hindi na nila ma-maintain ang kanilang mga kumpanya. Yung natitira [na orders], napunta sa amin…malaki na ’yun sa akin,” says Floro.
Now, FNDG exports to four clients in the U.S. and Japan. Its portfolio has widened from just coco-shell products to seashell products, jacking up their raw materials cost to P3 million each month.
Their income has also steadied because different production cycles meant that they would work on one product line during another’s off-season. Juggling accounts has become second nature: For instance, rather than lose an account when an old client doubled his order, but lowered his downpayment, FNDG brokered a deal with another exporter and sold at cost.
Saving isn’t a priority for the husband-and-wife team, given negligible interest on bank deposits. What money they have goes to repaying their business loans, rather than allow interest rates to shoot up further. “Tutal, andiyan na yung pera. Kung kailangan, ilabas, paikot-ikot lang,” says Gemma, indicating they also maintain a large inventory and balances in large commercial banks for easier business-to-business and business-to-client transactions.
In the event that they’ve got a little extra profit, they plow it back into the business. They’ve got 15 regular workers for whom they provide housing. And they also need storage space, so newly bought property is turned into residences or warehouses. “Hindi kami nag-ipon para may capital. Ang inipon namin is for inventory, at saka yung facilities,” says Floro.
“Wala kaming pera, pero maraming pera ang bangko,” he quips. “Basta in good faith lagi—kung para saan ’yung loan mo, dun talaga gagamitin, at alam mo na kung paano mo babayaran ‘yun. Good faith kayo sa iyong buyer, sa iyong tauhan, sa bangko. Siguro walang magiging problema. Kung isa dun mawala, kung hindi buo, masisira ang diskarte mo.”
BORROWING DO’S
It might be easier to get a loan from microfinance institutions than conventional banks, but you still have to prove you’re worth the risk. Rita Duenas, BanKO’s chief marketing officer, says that, unlike commercial banks, BanKO can’t always require clients to submit their asset declaration, balance sheets, or financial statements. “But this is not to say they do not have the capacity to pay,” she points out. “In our case, we look at the size of their business, their relationship with suppliers or distributors in the value chain, and the number of years their business has been operating. We also look at the health of their business, and usually require some documentary proof whenever possible.”
Originally published as part of the cover story titled "Small Loans, Big Dreams" in the June 2015 issue of Entrepreneur Philippines.