MANILA — A business can have customers, make money and be growing, yet still struggle to get a loan.
For Chris Burgess, Chief Investment Officer and co-founder of fintech lender First Circle, that is one of the biggest problems in Philippine SME financing. And he says the problem may have less to do with the quality of Filipino entrepreneurs than with the economics of traditional lending.
“There's nothing wrong with Philippine SMEs,” Burgess said in an interview on ANC’s Startup with Ron Cruz.
“Philippine SMEs are super confident, as you said, profitable, they're fast growing, they have everything that's needed.”
The problem, he said, is that conventional financial institutions are generally structured around much larger transactions. Banks can efficiently process loans worth tens or hundreds of millions of pesos, Burgess said, but a P500,000 or P1-million loan can be much harder to serve profitably once the costs of assessment, processing, documentation, compliance and customer service are factored in.
“Those are the type of amounts which can really make the difference for Philippine SMEs,” he said.
That creates a potentially costly mismatch: the borrower may need only a relatively small amount of working capital, but the lender may face many of the same processes required for a much larger loan.
BILLIONS GOING TO MSMEs BUT GAP REMAINS
This is happening even as banks continue to expand financing to micro, small and medium enterprises.
The latest BSP quarterly banking-system report available by September 2026 showed MSME loans at P541.6 billion as of September 2025, up 8.8 percent from a year earlier and equivalent to 3.3 percent of the banking system's total loans.
The BSP's latest available interest-rate data also show how expensive SME credit can vary depending on the borrower and lender.
In June 2026, effective rates on small and medium enterprise loans ranged from 7.36 percent to 13.95 percent per year, while microenterprise loan rates ranged from 8.96 percent to 13.45 percent. For Burgess, better data about a business could ultimately help reduce that risk and potentially the price of borrowing.
“Interest rates are really just a function of risk,” he said.
“So the more confident you have the work you're taking on less risk, that allows interest rates to be low.”
LOOKING BEYOND COLLATERAL AND CREDIT HISTORY
That is where First Circle's technology-driven approach comes in. Instead of looking only at conventional financial statements, assets and credit history, Burgess said the lender also examines how a business actually operates.
That can include who the company trades with, who its customers are and how money moves through the business.
“We very actively don't just look at, okay, how big is the business and how profitable?” Burgess said.
“Who are they trading with?”
If an SME is doing business with companies that the lender already knows to be reputable, that relationship can provide another signal of the borrower's reliability, he said.
This approach is particularly relevant in the Philippines, where alternative data and digital financial infrastructure are becoming part of the policy push to widen access to credit.
The BSP's National Strategy for Financial Inclusion specifically includes promoting alternative data for credit evaluation, while its Open Finance framework allows customers to authorize the secure sharing of financial data with participating financial institutions and third-party providers. The BSP identifies competitive credit and more streamlined financial services among the potential benefits.
For a small business, that could mean its actual financial behavior, not simply its collateral or conventional credit history, becomes more useful in determining how much it can borrow and at what price.
THE P25-BILLION BET
First Circle is betting that this model can scale.
The company says it has financed about P25 billion for more than 5,000 businesses since launching in 2016, with many customers accessing formal financing for the first time.
And the latest money coming into the ecosystem suggests investors also see room to expand SME credit.
On September 10, the International Finance Corporation approved a proposed investment involving a First Circle special-purpose vehicle, with a financing package of up to US$110 million.
The structure includes up to $20 million in IFC senior financing, $10 million in mezzanine financing and up to $80 million to be mobilized from other investors, according to IFC.
The financing is tied to a pool of SME receivables originated and serviced by First Circle and is intended to expand access to credit for underserved MSMEs in the Philippines.
That is a significant development because it moves the discussion beyond individual fintech loans and toward how capital itself can be recycled and scaled for smaller businesses.
WHY SMALL BUSINESSES MATTER SO MUCH
The stakes are huge.
The government's Philippine Export Development Plan, using PSA's 2020 List of Establishments, says MSMEs accounted for 99.51 percent of registered enterprises and 62.66 percent of employment.
More recent PSA establishment data also show the country's business base remains enormous: the 2023 updated List of Establishments recorded 1,105,722 operating establishments. That figure covers establishments across the economy and should not be equated directly with the number of MSMEs.
For the smallest companies, access to working capital can determine whether they can accept another order, buy inventory, pay suppliers or keep employees on the payroll.
Burgess said that is why First Circle's focus is not simply on lending more money, but on making small-ticket financing economically viable.
“Using technology to satisfy as much of those parts as you can allows for a much more efficient cost base,” he said.
That, he argued, makes it possible to offer smaller companies some of the same financial services available to much larger businesses.
FOR STARTUPS, THE FIRST TEST IS NOT PROFIT, IT'S TRACTION
For startups, Burgess has a simpler test.
“Early traction is really the key thing,” he said.
The question is whether the startup has demonstrated that customers actually want its product or service.
“Have you demonstrated that you're able to attain new customers, get them to borrow?” Burgess said.
“That's ultimately just an indication that this is a real product, a real opportunity and service that the market needs.”
First Circle says it can begin working with businesses after only a few months of operating history, although younger companies are assessed differently from established businesses.
That could be particularly important for founders who cannot offer years of financial statements or substantial collateral.
THE HUMAN SIDE OF THE CREDIT GAP
For all the talk about algorithms, data and fintech, Burgess said there is also a misconception about the people behind small businesses.
“The SME owners are very astute,” he said.
“They know exactly what they're doing.”
That matters because the credit decision is ultimately not just about numbers on a spreadsheet.
It is about whether a business owner has built something customers actually want, and whether the financial system can recognize that before the opportunity passes.
Burgess believes technology can help close that gap, but he does not see the banks disappearing.
Instead, he sees fintechs and other financial intermediaries filling the part of the market traditional banking may find difficult to serve efficiently.
“The banks have much bigger loan sizes, much cheaper funding,” Burgess said.
“It's really, really a different object to us.”
AND FIRST CIRCLE WANTS TO GO BEYOND LOANS
That is where the story takes another turn.
After a decade focused on SME credit, First Circle says it is now building toward a “full-stack neobank,” bringing more of the financial services a small business needs into one platform.
The company has expanded into business banking and other financial products, while its 2026 product expansion includes invoicing, corporate credit cards and automated payroll processing.
Burgess also disclosed on ANC's Startup with Ron Cruz that First Circle is in the process of acquiring a rural bank and said the transaction has been approved, with paperwork being finalized.
And there is another problem he wants to solve: getting paid late.
“One of the most consistent problems has been since the founding of First Circle is that they get paid late,” Burgess said.
For SMEs, an unpaid invoice can mean money is technically earned but unavailable when salaries, suppliers or the next project have to be funded.
First Circle has historically addressed that problem through invoice financing. Burgess said technology and payment solutions could offer other ways for businesses to access cash sooner.
The company's broader thesis is that a small business should not have to juggle multiple banks, lenders, accounting platforms and invoice systems just to manage its finances.
“You may have a lender over here. You may have an accounting software provider. You may have an invoice technology provider,” Burgess said.
“We really want to, as much as possible, centralize those requirements into one consistent offer.”
That could turn the SME credit gap into something bigger: a race to own the financial operating system of the Filipino small business.
And that is the other major story from this interview: why First Circle is moving from being simply a lender to building a wider SME financial platform, why Burgess says Filipino businesses are still being underserved by fragmented financial services, and what the company's rural-bank acquisition could mean for its next phase.