What is a Business Loan and Consumer Loan

What is a Business Loan? 

When a company requires additional capital or funds to operate, the owner usually has two options: raise funds internally through issuing stocks or raise them externally by applying for a business loan. A business loan is the creation of debt that must be repaid on the agreed-upon schedule with the agreed-upon interest. However, since a business loan is intended solely for business purposes, the loan agreement must be between the business owner and the lender. 

Features of a Business Loan

Higher Loanable Amount 

One of the most advantageous features of a business loan is the larger loanable amount that business owners can access. In general, it ranges from several thousand to millions of pesos – just enough to cover various and costly business needs.

Flexible Repayment Schedule 

Because a business loan allows a business owner to borrow a larger sum, the loan term is expected to be longer or more flexible than other loans. This feature is precisely why a business loan is a better option for financing business demands.

Competitive Interest Rate 

Fortunately, business loan lenders charge their borrowers fixed and competitive interest rates. As a result, regardless of the loan amount and repayment period, the business owner can expect interest rates to be low, if not fixed, throughout the maturity of the loan. 

Acceptable Collateral 

This feature is unavailable on all business loans, but collateral is usually required to secure the loan. The good news is that various assets, such as business equipment, vehicles, inventory, and accounts receivable, can be used as collateral.  

Heavy Documentation Requirement 

This is most likely the disadvantage of a business loan: they almost always require extensive documentation, which is understandable given the amount of money a lender is willing to lend. Generally, there are different requirements for sole proprietorships and partnerships. 

Examples of Business Loans 

Here are some examples of business loans being offered in the Philippines that business owners may want to add to their list: 

Security Bank SME Business Express Loan 

Loan Features 

Loanable Amount: ₱1 Million to ₱5 Million 

Loan Terms: 12, 18, 24, or 36 months 

Interest Rates: 

Related Fees and Charges 

Processing Fee: ₱3,000

Notarial Fee: 

• ₱400 for Sole Proprietorship 
• ₱800 for Partnerships and Corporations 

DST: Approved loan amount / 200 * 1.50 

Penalty Fee: 3% of the past-due amount for the month 

PSBank SME Credit Line

Product Features 

Loanable Amount: 

• Minimum of ₱2 million if the collateral is real estate
• ₱500,000 if against deposits 

Line Expiry: 1 year from the date of implementation, renewable annually 

Interest Rate: Based on the prevailing lending rate at the time of loan was availed.

Repayment: Interest payable in arrears while the principal is payable on or before maturity

Turnaround Time: Within 20 banking days upon submission of complete requirements 

BPI SME Term Loan 

Loan Features 

Loanable Amount: Minimum of ₱300,000

Loan Tenor: Maximum of 5 years 

Accepted Collateral: Real estate mortgage, deposit, or investment 

Processing Fee: ₱3,500 

What is a Consumer Loan?

A consumer loan is a type of loan granted to a consumer to cover a specific and wide range of consumer purchases. Personal loans, student loans, and auto loans are just a few consumer loans available in the country. 

Features of a Consumer Loan

Easy and Convenient Access 

There are numerous consumer loan providers in the Philippines, and most offer multiple loan application options. Interested applicants can apply online or at the nearest branch of their lender’s choice. Either way, you should submit complete documents for faster results.

No Collateral Required 

Most of these loan providers do not require collateral. However, the borrower’s credibility will be examined based on his credit history.

Higher Interest Rates 

Due to the lender’s greater risk due to the lack of collateral to secure the loan, they impose higher interest rates to minimize the impact. 

Minimal Requirements 

Consumer loans are ideal for covering unexpected expenses. Because, aside from the quick approval and disbursement, lenders only require a few valid IDs and documents that prove their identity and ability to repay the loan.

Examples of Consumer Loans

Maybank Personal Loan 

Loan Features 

Loanable Amount: Maximum of ₱1 million 

Loan Terms: up to 36 months 

Interest Rate: 1.3% per month 

Age Requirement: At least 23 years old but not older than 65 when the loan matures 

Related Fees and Charges 

Documentary Stamp Tax: ₱1.50 for every ₱200 for loans amounted to ₱250,000 and above 

Credit Life Insurance: Depends upon the calculation of age and loan maturity 

Processing Fees: ₱2,000 to ₱3,000 (depends upon the location)

Bukas Student Loan 

Loan Features 

Loanable Amount: ₱10,000 to ₱100,000

Loan Terms: 12 months 

Interest Rate: 1.5% per month 

Requirement:

• School ID of applicant or any valid government-issued ID 
• Tuition/Assessment Form issued by the school 
• Guardian’s / Guarantor’s valid ID, proof of residence, and proof of income 

Welcome Bank Auto Loan 

Loan Features 

Loanable Amount: ₱100,000 to ₱1 million 

Loan Terms: 12 to 48 months 

Payment Option: PDC 

Eligibility: 21 to 65 years old with a minimum monthly income of ₱26,000 for employed, and ₱80,000 for self-employed 

Conclusion

Depending on the borrower’s goals and financial needs, both business and consumer loans can provide a variety of advantages. If you wish to avail any of these two, you should take precautions and assess your financial capacity. Availing of any loan can improve or derail their plans – in terms of both business and personal careers.