Loan for Starting a Business in the Philippines

What is a Business Startup?

Business Startup refers to businesses that are still in the initial stage of business operation. When businesses are still starting, the capital needed to fund their operations mostly comes from the entrepreneurs starting the business. 

What is a Business Loan? 

A Business Loan can either be a secured (needs collateral) or unsecured (does not need collateral) type of loan. It is offered for the purpose of any related business operations such as additional working capital, plant expansion, product improvements, payment of short-term debts, etc.

Business Loans are typically provided to companies that have already been in operation for more than a year and can show proof of profitability. For businesses that are still starting, getting a business loan is difficult to obtain. However, there are other forms of loans that entrepreneurs can apply for to start one. 

Where to Get a Loan for Starting a Business

In the Philippines, there are different ways of funding a startup business. It can either be from peer-to-peer borrowing, crowdfunding, financial institutions, or angel investors. 

Peer-to-Peer Lending / Crowdfunding

This type of lending works best for borrowers who have difficulty getting approved for loans from traditional banks and for lenders who wish to invest their money. The screening process for borrowers does not take so much time as compared to traditional banks which can help them if they need the funds immediately. 

The following are P2P Lending Companies in the Philippines:

Kiva 

New entrepreneurs needing a source of capital to fund their dream may do so through Kiva. First, they need to send an application for a loan which will then be forwarded for underwriting and approval. Once that is done, the loan amount needed is posted for the lenders to see it. They can start crowdfunding it and provide loan increments of at least $25. Once the fundraising is complete, it is released to the borrower, and start paying it depending on the loan terms.

Blend PH

Borrowers needing capital to start a business can either apply using a Personal Loan or a Franchise Loan. 

Personal Loan

Loan Amount: Php50,000 to Php2,000,000

Loan Term: 12 months to 36 months

Franchise Loan 

Choose a franchise partner and get a loan up to Php2,000,000 payable up to 36 months.

Financial Institutions 

If peer-to-peer borrowing doesn’t work for you, applying for a business loan from a different financial institution can be an alternative. A lot of financial institutions have a Personal/Multi-purpose loan program suited to be used to start a business.

Examples of Financial Institutions that Offer Personal/Multi-Purpose Loans

BPI Personal/Multi-Purpose Loan

Loan Amount: Php20,000 to Php2,000,000

Loan Terms: 12 months to 36 months

Citibank 

Loan Amount: up to Php2,000,000

Loan interest: 26.9% to 30.9% per annum for new customers

Loan Term:1 to 5 years

Welcome Bank 

Loan Amount: Php50,000 to Php1,000,000

Annual Effective Interest Rate: 33.80% 

Loan terms: 12 months to 36 months

Tips for Choosing a Business Loan When Starting a Business

Identify the Loan Amount Needed

You must be well aware of the actual amount you need for additional funding to avoid borrowing more than you should. Borrowing money needs discipline and control and while you may have plenty of options for fund sourcing, you must only borrow the amount that you exactly need because should anything go sideways, you still need to pay for the loan amount. 

Choose a Workable Repayment Term 

One of the important factors to consider in applying for a business loan is the repayment term. When you agree on the loan term, you also agree to the interest rate applied on the chosen repayment period. In the same way, you must be able to choose the length of payment that works best with your budget to ensure that you do not miss any payment. 

Carefully Review the Terms and Conditions of the Loan

Borrowers must not be easily deceived by the loan proceeds that can be granted to them. There are cases wherein the only favorable part to the borrower is the loan amount, but not the interest rates or the repayment term. There might also be some additional charges for facilitating and executing the loan by the creditor. That is why it is very important to review every single word indicated in the terms and conditions of the loan you are applying for. 

Conclusion

Starting a business is a big gamble, you will invest every single thing that you could invest within your power to be able to successfully launch your dream business. Finding support financially to have enough working capital can be challenging but carefully considering your options will be able to get you there.