July 16, 2021 |
If you’re planning on starting a business in the Philippines, you may need additional funding to get your enterprise up and running.
If so, consider taking out a business loan acquired from banks, lenders, or the government. Financing options vary depending on where you acquire it.
If you are still unsure about business loans, here are some things that you should know about them:
What type of business loans can I get?
There are four basic types of business loans that you can apply for, depending on your business requirements.
- Short-term and long-term loans
Term loans allow business owners to get additional funding while letting them keep their personal financial resources intact. These loans are available as:
- Short-term loans that are usually payable within a year
- Long-term loans that can be paid anywhere from 5 to 15 years
Business owners can borrow from P100,000 to P20 million, which will then be deposited to the borrower’s bank account.
- A line of credit
Also known as a Line of Credit, this is essentially a short-term loan that provides borrowers quick, on-demand access to money. Credit lines can range from P500,000 to P20 million. The borrower can access the loan amount by issuing or cashing in checks, ATM withdrawals, POS transactions, and bank transfers.
Like other loans, credit lines accumulate interest, which is then paid in monthly installments.
- Secured business loans
A secured business loan requires a collateral such as real estate properties and bank deposits. Lenders can claim your collateral in the event that you default on your loan.
With collaterals to mitigate risk, lenders charge lower interest rates, offer higher loan amounts, and agree to longer payment terms – making it ideal for startups.
Do note that lenders will also charge fees related to their loan appraisal and collateral registration. These fees are usually P5,000.
- Unsecured business loans
An unsecured business loan does not require any collateral. Therefore, borrowers face higher interest rates, lower loan amounts, and shorter payment terms. Very few banks offer unsecured business loans because they’re risky. Thus, borrowers often turn to private lenders for unsecured business loans, or take out cash advances on their credit cards.
While taking out unsecured business loans may seem tempting if you are in a rush, it is generally not recommended as this type of loan can often saddle you with massive debts which can negatively affect your credit score.
Why should you get a business loan?
Aside from helping to fund your business, a business loan can also help you:
- Expand your business
- Improve cash flow
- Help with day-to-day transactions
- Invest in newer, better marketing strategies and materials
Another benefit to applying for – and promptly paying off – a business loan is its effect on your credit history. Once it has been established that you are a responsible borrower, you may qualify for even better deals on subsequent loans such as lower interest rates and longer payment terms.
How do I qualify for a business loan in the Philippines?
To qualify for a business loan, you should:
- Be over 21 years old but under 65 years old
- Have a good credit standing
- Have your business registered with the Department of Trade and Industry (DTI) or the Securities and Exchange Commission (SEC)
- Be operating a profitable business for a minimum of three years
- Meet the minimum annual revenue
Banks and private lenders in the Philippines are strict. They will require you to submit the following even before they evaluate your application:
- Valid government ID
- Proof of Business Billing Address
- Certificate from the DTI or SEC
- Certificate of Registration from the BIR
- Audited financial statements
- Company profile
- Completed loan application form
Thinking about setting up a business in the Philippines?
Starting a business in the Philippines can be a complicated process, and unforeseen problems may cause you to look for ways to get additional funding.
The good news, however, is that there are institutions such as FilePino, that can help you achieve all of your business goals. FilePino specializes in helping clients set up their businesses according to the letter of the law and helps them with the legalities of expanding in the future.
Founded by experts and made up of experienced professionals including corporate lawyers, certified accountants, and business leaders, FilePino can help you get your business up and running without a hitch.
Contact the FilePino Team now! Call +63.917.892.2337, email info@filepinostg.wpengine.com, or drop your inquiries here for more information.
