Why Do Businesses Need a Business Loan?
There are many possible reasons why business enterprises need additional funding. It can be for product improvement, a need to increase working capital, repair and maintenance of machinery and equipment, plant expansion, etc. The borrowing of funds can be part of the company’s strategy for a long-term benefit. Newly established businesses or even big companies may apply for a business loan.
Where to Loan for Businesses in the Philippines?
There are many lending sources borrowers may choose from here in the Philippines. They can borrow from a government agency that helps business enterprises with their financial needs, financial intermediaries such as traditional banks, non-bank financial institutions, private lenders, etc.
Two Types of Loan
When taking out a loan, financial institutions will either require collateral or not. Depending on the product, the loan will either be secured or unsecured.
- Secured Loan – secured loan uses collateral. The type of collateral needed will depend on the qualification required by each lending company. This collateral will guarantee that when there is a failure in payment of the loan on its due date, the collateral will be placed in an auction, and the proceeds will be for the payment of the loan. Also, the collateral may help the approval rate of the borrower. The higher the market value of the collateral, the higher the chance of the loan application being approved.
- Unsecured Loan – the basis of the approval of a loan is the borrower’s credit standing and no collateral will be required to back the loan approval.
Business Loans Examples
Government agencies
OWWA (Overseas Workers Welfare Administration) Overseas Filipino Workers – Enterprise Development and Loan Program (OFW-EDLP)
It is a project of the OWWA in partnership with the Landbank of the Philippines (LBP) and Development Bank of the Philippines (DBP) to help OFWs set up their businesses in the country.
Loan Features
Loan Amount
- Sole proprietor: ₱100,000 to ₱2,000,000
- Partnership/Corporation/Cooperative: ₱100,000 to ₱5,000,000
Interest Rate: 7.5% per annum
Equity: 20% of the Total Project Cost
Eligibility Requirements
- Member of OWWA (active/non-active)
- Earned training for Enhanced Entrepreneurial Development Training
- If the married OFW is currently working overseas, the representative applicant must be the spouse.
- For single, widows, and widowers, the representatives can be the following:
- Parent: not more than 60 years old
- Child: at least 18 years old
DTI Pondo sa Pagbabago at Asenso (P3)
This program of DTI helps Small Enterprises with additional working capital.
Loan Features
Loan amount: ₱5,000 to ₱200,000
Interest rate: 2.5% per month
Documentary Requirements
- A duly filled out application form
- DTI Registration
- Business Registration
- Valid ID
- Barangay Clearance
Banks
Security Bank SME Business Express Loan
Loan Features:
Loan amount: ₱1,000,000 to ₱5,000,000
Interest Rates & Loan Term:
- 12 months – 1.50%
- 18 months – 1.60%
- 24 months – 1.90%
- 36 months – 1.95%
Other Charges:
Administration fee – ₱3,000
Notarial fee
- Sole proprietor – ₱400
- Partnership and Corporation – ₱800
- Documentary Stamp Tax – Loan proceeds/200*1.50
- Late payment charge – basis: unpaid amount for the last month
- Late payment percentage: 3%
Eligibility Requirements
- A registered business under Philippine Laws
- With business operations of at least 3 years
- No existing debt that is more than 40% of monthly income
- For Partnership/Corporation
- Approval and signature of the loan form of the majority stockholder
- If multiple majorities stockholders, only one needs to sign
- Existing security bank account holder
- A resident of the Philippines (permanent)
- The representative must be at least 21 years old but not more than 65 years old
BPI SME Term Loan
SME term loan is a collateral-based loan offered by BPI to business loan applicants for additional working capital, business expansion, purchase of equipment, payment of short-term obligations, etc.
Loan Features
Loan Amount: Minimum of ₱300,000
Loan Term: up to 5 years.
Collateral Accepted: bank deposits, investment, or real estate mortgage
Other charges:
- Administration fee: ₱3,500
Eligibility Requirements
- Filipino citizen
- Minimum of 2 years of residency
- 21 to 70 years old.
- With business operations of at least 3 years
Non-Banking Financial Institutions
First Circle
First Circle is a private lending company that offers a revolving credit line that helps SMEs with their short-term financial needs.
Loan Features
Loan amount: up to ₱5,000,000
Interest rate: 1.39% per month or best price guarantee percentage if applicable.
Loan term: up to 6 months.
Radiowealth Finance Corporation SME Business Loan
Loan Features
Loan Amount: ₱10,000 to ₱3,000,000
Interest Rate: 0.04% to 1.44% per month
Loan Term: 1 month to 36 months
Eligibility Requirements
- Filipino citizen
- 21 years old and above
- With 2-year residency in the Philippines
- With a minimum of 1-year business operation
- For employed: minimum of 1-year employment and a basic salary of ₱18,000 per month.
- For professional borrowers: preferably a practicing professional, and a valid PRC license.
- For self-employed: a minimum of 1-year business operation
Conclusion
There are a lot of business loan providers in the Philippines where borrowers may choose a loan product depending on their needs and current financial situation. With numerous lender providers, borrowers may compare which loan product they could maximize the benefits from to help their thriving businesses succeed.