Have you considered tapping government agencies as a potential client base? Government agencies hold many of the biggest project bids for goods and services in the country. So fulfilling a successful project with the government can have many advantages for small and medium enterprises (SMEs). Among these benefits are as follows:
A more attractive client portfolio
Having a government agency in your company’s portfolio opens doors to many possibilities. For businesses that are just starting out, this is a great way to promote your brand. When you market your company with completed government contracts, other prospects will begin to see you as a more trustworthy company. It’s like having an invisible trust seal.
A major plus in your networking potential
Aside from the higher level of trust that your business will gain, closing deals with government agencies will also lead to more lucrative opportunities, including upselling or cross-selling with the same agency or getting referrals to help you close deals with other government agencies.
A better source of income
The famous American economist Milton Friedman is widely quoted as saying “There is nothing so permanent as a temporary government program.” Businesses who win government contracts have greater opportunities to create regularly recurring revenues since government projects tend to morph into continuous programs.
How to start doing business with the government
Now that you know the benefits of winning government bids, here’s how to participate in one. To make procurement processes more efficient, the government has established Philippine Government Electronic Procurement System (PhilGEPS). PhilGEPS is an online portal where government agencies post their procurement requirements. It was created to automate the procurement process, avoid confusion, and ensure transparency in government contracts.
Suppliers (i.e. manufacturers, distributors, contractors, and consultants) who are registered in the system as a PhilGEPS member are the first to view and submit bidding documents to secure government contracts.
- Visit the PhilGEPS website and click the "log in" button located at the upper right-hand corner of the page.
- When prompted, choose "Supplier" and wait for the website to take you to the next page.
- Click "Register Now" and fill out the required details. You will need your company to submit the following:
- Taxpayer Identification Number (TIN)
- Department of Trade and Industry (DTI) license
- Securities and Exchange Commission (SEC) certification, and other pertinent information to prove your company has legitimate business operations.
Note that registration on the PhilGEPS website is not automatic. To complete the registration process, you need to wait for the administrator to send you a username and a password. This usually takes 24 to 48 hours.
There are two membership options: Free and Platinum. If you choose the Free Membership, you get access to government procurement requirements. If you choose the Platinum Membership, you can view the same projects and receive a PhilGEPS certificate required for most government procurement contracts. The Platinum membership costs PHP 5,000.
The requirements for the Platinum Membership are:
- Business Permit
- DTI Certificate
- Audited Financial Statement
- Tax Clearance
Their Admin will verify your uploaded documents and if approved, you can pay the membership fee at any Land Bank branch.
Why do SMEs hesitate to submit bids?
Despite the advantages of winning government projects, the vast majority of eligible companies never submit bids. The two main reasons for this hesitation to submit bids are 1) concerns about adhering to strict government procurement procedures, and 2) concerns about acquiring the funds needed to fulfill those same requirements.
Being a member of PhilGEPS addresses various issues relating to bid submission and government procurement procedure adherence. However, the more pressing concern among business owners is how to secure funds for the project.
When government agencies issue an invitation to bid, interested bidders will immediately get an idea of how much the project will cost them. They can use this information to decide if they should take on the project or not. When preparing a project bid, the company should also consider the possibility of rising costs that could significantly impact the profitability of the project.
When a business wins a government project contract, they are more often than not faced with requirements and payment terms that surpass their current capacity to deliver the contract. They need more cash to hire employees and purchase materials. What’s more, government clients may take around 6 months to 2 years to complete the payment. For most SMEs, this can significantly hurt their cash flow.
Instead of rejecting these opportunities due to funding challenges, the best solution is to seek reliable financing that covers project expenses. Below are the two main financing options that SMEs can turn to when they need funding:
Banks offer businesses both secured and unsecured loans. Secured loans come with lower interest rates because they require collateral. Unsecured loans on the other hand don’t require collateral, but come with higher interest rates and more rigorous approval processes.
Either of these options for bank loans could be strategic, depending on the current financial position of the company. One notable disadvantage is that banks don’t process loans quickly, which is certainly not an ideal situation for working capital shortages that are hindering project completion. Plus, there are stringent requirements that newer businesses may not be able to comply with.
Private financing firms
Private financing firms have developed innovative alternative financing solutions for SMEs that either do not qualify for a bank loan or need funds more quickly than conventional lending practices will allow.
Private financing firms like First Circle have more simplified financing options and application processes as compared to traditional bank loans. First Circle’s financing options like Purchase Order Financing and Invoice Financing let SMEs use their billing documents to apply for funding.
The company’s simplified approval process for Purchase Order Financing and Invoice Financing involves only three steps:
- Send documents for verification.
- Submit a purchase order or invoice.
- Access the extra funds.
You are still required to make repayments, but the primary focus of the documentation is on the transaction and your customer’s ability to pay, not on the business owner’s personal and company finances.
A purchase order or an invoice coming from a government agency makes the entire application process easier and faster because you’re submitting a document from a credible client.
With First Circle, you shouldn’t hesitate to participate in government bids because of challenges on financing.
Government bids can be intimidating for SMEs to take part in, especially when you consider the process to qualify as a supplier and the competition you have in the bidding process. More importantly, you need to ponder the impact these projects can have on your business’s finances.
But more than the challenges that come with government contracts, you should focus more on the growth opportunities they can bring. With the right planning and research, you will find that there are viable solutions that’ll help you achieve your business goals.
When it comes to financing, remember that First Circle is your trusted partner for overcoming temporary financial challenges. Should you need financing support in fulfilling government projects for your company, click here to apply for Purchase Order and Invoice Financing.