Manual for the Use of Business Loan in the Philippines

In order to start or support a business, one needs financial support. In most cases, only a business loan can help money can be borrowed from the Filipino government, a bank, or a private lender.

Depending on the needs, businessman choses the type of pautang online he want to take. In this article, we will tell everything you need to know before applying for a business loan in the Philippines.

Advantages of Personal Business Loans

All people dream about having stable income and working less. This can be achieved when you work for the best boss – yourself. If you have a good idea for a business plan but you are lack of money, personal business plan is what you need.

This type of loan is characterized by comparably low interest rates, as well as loyal terms of repayment. Carefully study types of the business loans and terms of the possible lenders. In case, you are at a loss, contact a specialist to choose the best possible option.

How to Choose Your Type of Business Loan?

So, you are in a situation when you want to start, support or develop your business but do not have enough money for that. To choose a personal cash loan for your particular situation, consider the following factors.

1. Why do you borrow money? Here, it is important to correctly understand for how long you borrow money. Is your purpose a long- or short-term investment?
2. How much do you need? The amount of money you need would influence the choice greatly, as interest rates depend on credit amounts as well. Rising the value of your collateral, you can expect to be approved for a bigger amount. Note that governmental organizations are unlikely to risk, it’s better to ask banks for higher amounts.
3. What method of funding do you prefer? Do you need all the money at once via one transaction? Or do you prefer to have access to the funds when you need them?
4. Within what period of time will you be able to repay the amount? To calculate this term, you need to realistically evaluate your business plan.
5. What is the preferred repayment mode? Depending on the profit flow of your business, choose fixed and flexible monthly payments.
6. Do you have something to use as collateral? Depending on its value, you can calculate the amount of personal business loan you can borrow.
7. What interest rates are suitable for you? It is reasonable to want the lowest interest rate of the business loan. You must keep in mind that interest rates vary according to the lender’s prevailing rate, term of the business loan, and type of credit.

Types of Business Loans in the Philippines

After considering the above factor move to choosing the type of the business loan. There are basically four of them:

• term loans
• credit lines
• secured loans
• unsecured loans

let’s talk about them in details.

Term Loans for Small Business Needs in the Philippines

Term business loans allow businessmen pursue their goals while keeping their own funds intact. If you spread out amount repayments in regular installments, repayment of the credit becomes more manageable.

In what cases term loans are the best option? This type of personal loans is a good choice for short-term or long-term funding in case of buying new equipment, reconstruction or renovation of business space, adding fixed working capital or financing franchise business.

Depending on the lender, the amount of term loan ranges between PHP 100,000 and PHP 20 million. You can take a credit for a period from one year to 15 years.

Where can you get a term loan?

• BDO SME Term Loan
• Security Bank SME Business Mortgage Loan
• BPI Family Ka-Negosyo Loan
• OWWA Loan (for OFWs)
• Metrobank SME Term Loan
• PSBank SME Term Loan with Prime Rebate
• SSS Business Development Loan Facility
• SSS ASENSO

Consider all the details of the credit before applying. Study the terms and requirements of a particular lender.

What About Credit Lines?

Short-term loans, which provide quick access to finances on demand are called line credits. One of the peculiarities of the credit line lies in the interest accumulation, which starts only when you purchase against the credit line. Greater financial control allows paying the interest only on the amount that has been used.

A credit line is suitable as a short-term loan. It is often used for purchase of additional supplies, contract financing, increasing working capital, etc.

The sum between PHP 500,000 to PHP 20 million against a line of credit is available by the credit line.

Credit line is open for a year and must be renewed every year. Repayment of the credit line is more flexible. The principal of the credit can be paid any time. Though the interest is paid every month.

Secured Loans for Businesses

The main feature of the secured loan is the presence of the collateral. Real estate property or bank deposits can be used as collateral. It is a sort of a guarantee that the lender will not lose his money. As the lender has less risks, the interest of the secured loans is generally lower, the terms are longer and the amount can be bigger.

Secured loan is the best for startups and businesses, which need funding at the beginning of their activity.

It is important to note that the lender might add collateral-related fees. Find out their amount before signing papers.

Who and When Can Use Unsecured Business Loans?

Unsecured business loans are the opposition of the secured ones. They do not require collateral, which is a positive moment, but they are much more difficult to get, which is a bad side. Having bad credit history destroys your chances to get it completely. Applying for an unsecured business loans, get ready to pay higher interest and return the money quicker. Besides, the amount available for lending is lower without collateral.

Only a few banks in the Philippines provide unsecured loans for their clients. Private lenders are more likely to issue this type of credit.

Requirements for a Business Loan

Depending on the lending organizations, requirements to the borrower can vary. However, this basic list of documents is usually common for everyone:

• Passport of the citizen of the Philippines;
• certificate of income (if available);
• certificate of registration DTI / SEC;
• official permission for business;
• information about property abroad;
• an extract from the personal bank account;
• documents on tax returns;
• a completed application form.

Each credit institution has the right to ask for a different or additional list of documents. Explore this issue beforehand and prepare all the needed documents before you apply.