Business Loan Application in the Philippines Made Easy
They say entrepreneurship is living a few years of your life like most people won’t, so that you can live the rest of your life like most people can’t. But we all know being the next Henry Sy or Injap Sia is no easy feat.
An entrepreneur must pass different challenges to scale their small business. One hurdle is getting the funds for expansion, either by opening new shops or increasing the product line.
Many banks and financial institutions offer financial solutions for positive cash flow to grow their venture through a business loan.
Types of business loans
There are various SME loan products in the market and you must understand what they offer to assess which one will work best for you. Here’s a list of small business bank loans available in the Philippines:
- Line of Credit
- Equipment Loan
- Conventional Business Loans
The Line of Credit refers to an SME loan that is used for a company’s short-term working needs to keep the business going, be it for company payroll or inventory purchases. Commonly, such a loan does not require borrowers to have a collateral. However, they come with high interest rates.
If you are planning to purchase new equipment or upgrade the current ones, you may opt for an equipment loan. Applying for this type of business loan will require you to budget carefully since you will be making monthly payments on necessary items, avoiding large purchases all at once.
Conventional business loans refer to loan for larger amounts. The term of the loan will be based on several factors, such as loan amount, the purpose of the loan, and the state of your business at the time of loan application, among others.
Loan purposes
- Acquiring a commercial property
- Modernization of facilities
- Purchase of equipment or upgrade existing ones
- Expanding product line or service
- Purchase of inventory
- Increase working capital
SME-business loan eligibility
| Monthly income requirement | PHP30,000 |
| Covered location | All Provinces of Luzon, except Bicol Region |
| Required business tenure | 6 months |
| Loanable amount | PHP30,000-PHP10,000,000 |
| Turnaround time | 7 business days |
Business loans requirements in the Philippines
Here are some of the most common documents lenders require you to secure. However, requirements may vary depending on your chosen loan provider.
- Duly accomplished application form
- Company profile
- Photocopy of Income Tax Return (ITR) for the last three years
- Photocopy of two valid IDs
- For single proprietorship, copy of valid DTI registration documents
- For corporate business, copy of valid SEC registration documents
- Bank statement for the last three months
- Audited financial statements for the last three years
- Latest proof of billing (both business and residence)
- List of customers/suppliers and details about their dealings
- Location plan (if applicable)
6 Steps to getting a small-business loan
You may find SME loan application intimidating and tedious. On the contrary, it is just easy as applying for other banking products, especially if you know the drill. Here are some steps to take in maximizing your chances of a loan application approval.
- Do your research
- Maintain a good credit score
- Figure out how much money you really need
- Do not borrow short-term loans to fund long-term investments
- Complete the required documents
- Be prepared
- What do you need the money for?
- How long will it take you to pay it back?
- How long have you been in the business?
- What is the current financial shape of your business?
- How much collateral do you have to put up for the loan?
You must understand the different kinds of small business loans in the Philippines since options may vary depending on the amount and length of the loan.
Check each lender’s profile—the necessary documents to secure, interest rates, and payment schemes—before choosing one. Plus, each lending company offers both short and long-term financing. Make sure to review all the necessary details and match it to your current need.
Exploring your options will help you find the loan product that suits the needs of your business and meets your financial capacity.
Did you know that when you apply for a business loan, your personal credit score matters to financial institutions as well?
Many lenders will look at your personal credit score and risk profile when deciding whether they will grant you the loan or not.
History of credit card payments, outstanding loans, and financial statements are some of the factors lending companies will look at since these may reflect your capability to pay your business loan.
Review such factors and settle any unpaid debts first to get a higher chance of loan approval.
Before applying for a loan, determine first how much money you need. Many entrepreneurs often seek more money that they really need, which may lead to financial trouble.
Identify first where you will use your money. Is it for purchasing a new equipment? Opening a new branch or increase in inventory? This way, you can project how much money you really need to loan.
In case that you are planning to open new branches or purchase new equipment, do not finance it by applying for a short-term loan. Doing this will cause you to pay for high-interest rates since short-term loans have a higher interest rate compared to long-term loans.
Remember that the longer the payment term of your loan, the lower the monthly amortization and interest rate you need to settle.
On the other hand, if you expect that your company’s sales will improve in the next three months, you can consider opting for a short-term loan, for the meantime.
One way to increase your success in getting the business loan is to complete all the necessary documents provided by your lender. Also, ensure that you completely fill up the application form.
Apart from the necessary documents, some lenders will ask a few questions to know more about you as part of the small business loan application process. After all, they need to know if you are credible for the loan. So, be prepared to answer some of the following questions:
Many lending companies in the Philippines offer different business loan products, which provide you with a myriad of choices that will suit any financial situation your business has. However, this might confuse you since you need to go through each lender’s profile to see what they are offering. That’s where eCompareMo comes in.
FAQs
How will I know which type of lending company is right for my business?
Remember that every lender is different. Make sure to evaluate first the business requirement you need to address and shop around to see which lender and what loan product suits your requirement.
What do lenders consider when deciding whether they will grant the loan or not?
- How long you have been in business
- Credit score
- Monthly revenue
What collateral is acceptable?
- Bank deposits
- Residential property
- Commercial real estate
- Mixed-use (residential & commercial)
How long will it take to approve my loan?
If you submit all the necessary requirements, the loan decision usually takes around seven to ten banking days.
eCompareMo makes it easier for you to choose from a wide variety of loan products with just a few clicks. By providing a comprehensive online comparison, eCompareMo saves you time and money.
Expand your business in the shortest possible time. Apply for a business loan now!