21 Feb Tech Shake
Manila, Philippines — It’s the 15th of January. 3 more hours and banks are already closed. While most workers are preparing for a night out with friends, about to enjoy a cold bottle of San Miguel beer; stress, fear, and thoughts about checks that are about to bounce are the companions of 29 year old businesswoman, Shiela, as she scours her phonebook, calling anyone willing to give her a loan so she could pay her employees and her company’s dues before the day ends.
Shiela, like other entrepreneurs, is a dreamer. Her passion for art and her out of the box ideas of communicating pushed her to put up a company that provides advertising services for different big corporations in the Philippines. Though she is a new player in the space, her perseverance got her big contracts within her first year of operations. Her desire to make things happen fast also made her take huge compromises to get the deals, which includes unclear or undefined payment terms from her clients. Nonetheless, she has the soul of an entrepreneur, ready to take on anything that comes her way.
Fast forward to this year, 5 days before January 15, Shiela learned that with her current burn rate, her cash flow wouldn’t be enough to cover her payables scheduled for release. She started to feel a little nervous, but for the most part, remained confident, with the promise that her receivable due in 3 days before January 15 from one of the biggest telcos in the Philippines can be collected. But as they say, most promises are made to be broken, and in Shiela’s case, it has not been an exemption. After sending out one of her staff to collect, instead of receiving payment, she received a death statement — — her receivable has not been released yet, and has no specific date on when it will be available.
With 2 days left before the 15th, she immediately prepares all the documents she thought the banks would need to attempt to get a loan from them.
This time, Shiela’s perseverance is not enough. After meeting 5 banks for a loan, none could get her a quick loan within 2 days. She would have to wait for at least 2–4 weeks to get the loan she was asking for. With a formal loan not meeting her timeline, one of the banks suggested she takes an advance from her credit card instead.
Being a former employee of a good company, Shiela was able to get a credit card of up to 250,000 PHP credit line. It seemed like a very good option at the time, especially since she can withdraw the amount ASAP. But there was a huge downside to it — if she takes this advance from her credit card, she will have to pay 15% month per month until the amount is paid. That’s 180% annualized percentage rate, she would be paying more than double the amount she needed.
Time is almost up for Shiela. 15th day of January 2017, a day she would never forget. All she could do was wish she could freeze time as she gets her first taste of the excruciating pains of entrepreneurship.